There have been several reports that Industrial Production in May came in 0.1% below April, suggesting that troubles are afoot. These reports came to that conclusion because they look at seasonally adjusted data.
At ITR Economics, we prefer non-seasonally adjusted data. Utilizing rates-of-change eliminates the need to massage the data and instead lets the data speak for itself. The use of rate-of-change techniques provides for a clearer analysis that uses the actual data as opposed to being one process removed from the actual data.
Using the non-seasonally adjusted data reveals that Industrial Production in May went up 0.26% from April to May (not down 0.1% as others stated). The increase is milder than the post-recession average but well within normal parameters. That’s quite a difference in perspective and one that will hopefully lead you to plan on slowing growth (based on the leading indicators) as opposed to thinking that the economy has stalled (and you need to prepare for an imminent downturn).
Manufacturing (as opposed to Total Industrial Production) posted an April-to-May decline of 0.6%, which is the steepest April–May decline since 2008 (think Great Recession). The decline in manufacturing is due to automobile manufacturing. The April-to-May change without automobiles posted an increase of 0.9%, over two-times steeper than average. Manufacturing in the US, apart from automobiles, had a good May.
The ITR Leading Indicator™, and numerous others, is signaling a slowing rate of growth in the US later this year and into 2019. Knowing how you are correlated to these indicators, and to the economy in general, will help you determine the optimum time to implement marketing, sales, and upgrade plans that are suitable to a slowing-growth environment.
Alan Beaulieu
President