Is Industrial Production 'Less Bad'?

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Includes: AIRR, FIDU, FXR, IYJ, RGI, SIJ, UXI, VIS, XLI
by: Hale Stewart

By New Deal Democrat

One of my pet peeves is analysis that relies too much on year-over-year comparisons, as in "X is still YoY positive/negative." If you do that, you are going to miss turning points which happened sometime during that year - perhaps many months before the sign turned.

But one good use of YoY comparisons is to see if they are getting "less good/bad." This will help you spot a change in trend.

A few analyses in the last several weeks noted an improvement in the YoY comparison in Industrial Production, and I also made mention of it in my last Weekly Indicators column. But let's take a little closer look, first at the long term:

YoY industrial production tends to bottom right at the end of recessions (this is true of most recessions over the last 100 years - the above graph is limited better to show the current situation). That little hook at the right is the recent improvement in YoY industrial production.

Here is a close-up of the last year:

There have only been two months of "less worse" readings, and they are well within the range of noise. I would like to see several more months of such improvement before I would be confident that the shallow industrial recession has bottomed - although, with the recent decline in the US dollar, that is the more likely scenario.