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May 2018 Industrial Production Declined

Summary

The headlines said Industrial Production was well below forecasts.

Prior month's data was revised up.

And the rolling averages remain on an upward trend line.

The headlines say seasonally adjusted Industrial Production (NYSE:IP) declined month-over-month. Our analysis agrees but there was significant upward revision to the data for the last six months.

There was significant upward revision to the existing data over the last 6 months. So industrial production is pretty much at the same level as we thought it was last month. The best way to view this is the 3 month rolling averages which insignificantly declined. Industrial production is in a long term upward trend.

Manufacturing employment rate of growth is accelerating year-over-year..

  • Headline seasonally adjusted Industrial Production (IP) was down 0.1 % month-over-month and up 3.5 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth decelerated 1.1 % month-over-month, and is up 3.5 % year-over-year.
  • The unadjusted year-over-year rate of growth decelerated 0.1 % from last month using a three month rolling average, and is up 3.9 % year-over-year.
  • The market was expecting (from Bloomberg / Econoday):
Headline Seasonally Adjusted Consensus Range Consensus Actual
IP (month over month change) -0.6 % to 0.5 % +0.1 % -0.1 %
IP Subindex Manufacturing (month over month change) -0.8 % to 0.4 % +0.1 % -0.7 %
Capacity Utilization 77.4 % to 78.3 % 78.0 % 77.9 %

IP headline index has three parts - manufacturing, mining and utilities - manufacturing was down 0.7 % this month (up 1.7 % year-over-year), mining up 1.8 % (up 12.6 % year-over-year), and utilities were up 1.1% (up 4.0 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining also is 10.8 %.

Comparing Seasonally Adjusted Year-over-Year Change of the Industrial Production Index (blue line) with Components Manufacturing (red line), Utilities (green line), and Mining (orange line)

Unadjusted Industrial Production year-over-year growth for 2 years has been near or below zero - it is currently trending up and in expansion.

Economic downturns have been signaled by only watching the manufacturing portion of Industrial Production. Historically manufacturing year-over-year growth has been negative when a recession is imminent.

Seasonally Adjusted Manufacturing Index of Industrial Production - Year-over-Year Growth

Seasonally Adjusted Capacity Utilization - Year-over-Year Change - Seasonally Adjusted - Total Industry (blue line) and Manufacturing Only (red line)

Econintersect uses unadjusted data and graphs the data YoY in monthly groups.

Industrial production growth will vary month-to-month. But based on the current trend lines, this month's data is not signalling any change to the current trend lines.

Other Economic News this Week:

The Econintersect Economic Index for June 2018 improvement cycle continues and remains well into territory associated with normal expansions. There are continuing warning signs of consumer over-consumption, as well as a degrading relationship between retail sales and employment.

Please visit our landing page for a summary of all of our analysis this past week.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.