Main takeaways:
  • Industrial production fell 0.2% in October, largely due to energy.
  • Non-energy IP rose 0.4% in the month. Core manufacturing rose 0.3%. Both were revised up in Aug/Sept.
  • Core manufacturing is growing a bit above 2% -- not too far from the 1.4% annualized growth observed since 2010.
  • ISM / Markit surveys and Conference Board leading indicator do not suggest upside for industry in the near term.
  • Weakness in oil sector and strong dollar remain a concern.

Industrial production fell 0.2% mom in October, largely due to energy. Non-energy industrial production rose 0.4% mom October and the previous two months were revised up:

Core manufacturing production (excluding vehicles and hi-tech) rebounded 0.3% mom and was also revised upward:

A longer time-series of core manufacturing shows production growing at 2.3% -- not too bad, given the average growth of 1.4% since 2010.

What about the upcoming months? Can we expect any improvement?

The manufacturing surveys (ISM, Markit) have diverged in recent months, with Markit holding steady and ISM falling. The growth pace of industrial production, however, already seems aligned with the weak ISM figures.

A simple linear regression with the ISM does not suggest upside in the near term.

The Conference Board leading indicators are also catching down with weak industrial activity.

The diffusion index of industrial production tends to lead actual production by a few months, but it weakened in the last couple of months -- reducing the room for upside surprises in total production.

Weakness in the oil sector and USD strengthening continue to weight on industrial activity.