Is The U.S. In A Recession?

by: John M. Mason


The industrial production numbers just released indicate that industrial production declined by 1.8 percent, year-over-year, in December and declined by 0.9 percent in the fourth quarter, year-over-year.

Capacity utilization in manufacturing in December is 3.2 percent below the level it was at in December 2014.

The growth rate of real GDP tends to parallel the growth of industrial production: might the real growth rate of the US economy slip into negative territory...stay tuned!

The Federal Reserve Board just released the December Industrial Production numbers.

Not good!

December 2015 over December 2014, industrial production declined by 1.8 percent.

This is down from the November, year-over-year, figure of a drop of 1.2 percent. In October, industrial production rose, year-over-year, by 0.3 percent.

For the fourth quarter as a whole, industrial production dropped by 0.9 percent.

In the third quarter, industrial production rose, year-over-year, at a 1.2 percent rate. This was down from the second quarter 1.5 percent increase. In the first quarter, the rate of increase was 3.5 percent and for the fourth quarter of 2014, the gain was 4.5 percent.

So, the rate of increase in industrial production dropped every quarter in 2015, moving into negative territory in the fourth quarter.

The importance of this is that the growth rate of real GDP tends to track the performance of industrial production.

In the third quarter of 2015, the rate of growth of real GDP, year-over-year, was 2.1 percent. This was down from 2.7 percent in the second quarter, and 2.9 percent in the first quarter. In the fourth quarter of 2014, the growth rate was 2.5 percent, but this was a modest decline from the 2.9 percent obtained in the third quarter of 2014.

In other words, the rate of growth of real GDP seems to parallel that of industrial production.

Does this mean that the year-over-year rate of growth of real GDP for the fourth quarter of 2015 will be in negative territory?

So much for President Obama's rosy picture of the economy given in his State of the Union speech this past week.

And, what about capacity utilization in manufacturing?

Well, in December 2015, capacity utilization fell to 76.5 percent. In December 2014, capacity utilization was 79.0 percent. So, we have a 3.2 percent decline in capacity utilization from one year ago.

These are not good figures!

And, the December numbers do not just represent a unusual monthly swing.

The decline in both the growth rate of industrial production and in the rate of capacity utilization has been relatively steady throughout the year.

Does this mean that we might go into a recession in 2016?

It cannot be ruled out!

We have inflation dropping in the United States and throughout the world. We have stock prices dropping throughout the world. We have commodity prices dropping throughout the world. We have economic growth dropping throughout the world. And, we seem to be on the edge of a wider war in the Middle East and elsewhere.

The December numbers for industrial production and capacity utilization are not good!

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.