Showing all posts tagged #industrial-production:


US industrial activity better than expected in January; but overall picture is unchanged

Posted on February 17th, 2016

Main takeaways:
  • Industrial production rose 0.9%mom in January (above mkt consensus), but December decline was revised even lower to -0.7%mom (from -0.4%).
  • Non-energy IP rose 0.5% and core manufacturing increased 0.3% in January.
  • Weakness in oil sector and strong dollar remain a concern for industry activity.


The table below compares total IP, Manufacturing production, Core manufacturing and IP excluding energy. All have been weak in recent months, but the energy sector has had a material negative impact on total industrial activity. Excluding energy, one can see a slowdown in production since late 2014 -- but the overall picture still seems aligned with the weak trend growth observed since 2010.

Production level and growth rates
Capacity utilization



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

The Markit PMI has converged to the (weak) ISM, and both suggest there's no upside for industry in the near term.

A simple linear regression with the ISM makes this point clear.

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, and it shows a tentatively better picture for IP.

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


US industrial activity remained weak in December

Posted on January 15th, 2016

Main takeaways:
  • Industrial production fell 0.4%mom in December, and November decline was revised down to -0.9%mom (from -0.6%).
  • Non-energy IP and core manufacturing were both close to flat for the second month in a row.
  • ISM / Markit surveys and Conference Board leading indicator do not suggest any rebound for industry in the near term.
  • Weakness in oil sector and strong dollar remain a concern for industry activity.


Industrial production fell 0.6% mom in November, again largely due to energy. Non-energy industrial production was flat in November.

The table below compares total IP, Manufacturing production, Core manufacturing and IP excluding energy. All have been weak in recent months, but the energy sector has had a material negative impact on total industrial activity. Excluding energy, one can see a slowdown in production since late 2014 -- but the overall picture still seems aligned with the trend growth observed since 2010.

Production level and growth rates
Capacity utilization



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

The Markit PMI has converged to the (weak) ISM, and both suggest there's no upside for industry in the near term.

A simple linear regression with the ISM makes this point clear.

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 few of months.

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


US Industrial Production remained weak in November/2015

Posted on December 16th, 2015

Main takeaways:
  • Industrial production fell 0.6% in November, again largely due to energy.
  • Non-energy IP was close to flat in the month. Core manufacturing rose 0.1%.
  • 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 0.6% mom in November, again largely due to energy. Non-energy industrial production was flat in November.

The table below compares total IP, Manufacturing production, Core manufacturing and IP excluding energy. All have been weak in recent months, but the energy sector has had a material negative impact on total industrial activity. Excluding energy, one can see a slowdown in production since late 2014 -- but the overall picture still seems aligned with the trend growth observed since 2010.

Production level and growth rates
Capacity utilization



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

The Markit PMI has converged to the (weak) ISM, and both suggest there's no upside for industry in the near term.

A simple linear regression with the ISM makes this point clear.

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 few 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.


US Industrial Production: non-energy production rebounded in October/2015

Posted on November 17th, 2015

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.


Global industrial trends

Posted on November 6th, 2015

Main takeaways:
  • Global PMI continues ticked up in both developed and emerging countries.
  • But there is a clear divergence on what the PMIs suggest:
    • Developed countries industrial production growth likely to move sideways at a low pace of growth
    • Emerging countries IP growth likely to slowdown further.


Global PMI ticked up in October...

... and it was an across the board increase; but emerging markets continue to under-perform its developed peers.

This suggests industrial production in developed economies should continue to grow at just above 1%...

...while industrial production growth in EM economies should slowdown further in the coming months.

And within emerging countries, the slowdown in industrial activity is driven by Asia (China), but it rebounded a bit in October.

The EM and DM PMIs suggest a convergence of growth between the regions is likely to continue...

... and as a result global industrial production growth is likely to slowdown. The chart below shows that world industrial production is usually cyclical -- except in the unusual expansion period between Dec/2001 and Feb/2008 and in the last 4 years up to mid-2014.

The previous slowdown / contraction periods (Dec/94 to Dec/95, Oct/97 to Oct/98, Aug/2000 to Dec/01, Feb/08 to Mar/09) were all period of crisis (Mexico, Asia, Nasdaq, and the GFR) and lasted about one year. The current slowdown is shallower but is also about one year old.




US Industrial Production: still weak (Sep/2015)

Posted on October 16th, 2015

Main takeaways:
  • Industrial production rebounded in the third quarter but the overall picture is still weak.
  • ISM / Markit surveys and Conference Board leading indicator do not suggest upside for industry in the near term.
  • The diffusion index is a silver lining. It suggests the worst may be behind.
  • But, renewed weakness in oil sector and strong dollar could continue to weight on industrial activity.


US industrial production is currently at the same level it was in October/14 (red line in the chart below). An important part of the industrial production growth in 2012 to 2014 was driven by the energy sector and, to a lesser extent, by vehicle production. The chart below illustrates this point: core industrial production (blue line -- excluding energy, vehicles and high-tech) remained flat from late 2011 until 2013 while total industrial production drifted upwards.

In 2014 industrial production moved up substantially, but in the last three quarters both total IP and core IP have flattened out.


The chart above shows that industrial production rebounded a bit in the third quarter compared to the previous one (right-side chart).
What about the fourth quarter? Can we expect any improvement?

The manufacturing surveys (ISM, Markit) do not suggest upside for IP in the near term.

A simple linear regression suggests IP likely to remain weak.

Markit PMI has a shorter story, but the message is similar to the ISM

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


The diffusion index of industrial production is the only silver lining. It has improved in the recent months and often leads the overall IP growth by a few months, suggesting an improvement until early next year.

On the negative side...

... renewed weakness in oil sector could again spillover to other manufacturing sectors, similar to what happened earlier in the year.

...and the dollar strengthening continues to weight on industrial activity.







Global industrial trends

Posted on October 1st, 2015

Main takeaways:
  • Global PMI continues trending down.
  • But there is a clear divergence between emerging and developed countries...
  • ...that suggests convergence of growth between the regions is likely to continue...
  • ...resulting in a slowdown in global industrial production growth compared to pre-crisis growth pace.


Global PMI continues trending down...

... with a clear divergence between developed and emerging markets happening in the last 6-7 months.

This suggests industrial production in developed economies should continue to grow at around 1%...

...while industrial production growth in EM economies should slowdown further in the coming months.

And within emerging countries, the slowdown in industrial activity is driven by Asia (China)

The EM and DM PMIs suggest a convergence of growth between the regions is likely to continue...


... and as a result global industrial production growth is likely to slowdown. The chart below shows that world industrial production is usually cyclical -- except in the unusual expansion period between Dec/2001 and Feb/2008 and in the last 4 years up to mid-2014.
The previous slowdown / contraction periods (Dec/94 to Dec/95, Oct/97 to Oct/98, Aug/2000 to Dec/01, Feb/08 to Mar/09) were all period of crisis (Mexico, Asia, Nasdaq, and the GFR) and lasted about one year.




US Industrial Production: still weak (Aug/2015)

Posted on September 15th, 2015

Main takeaways:
  • August industrial and manufacturing production gave back part of July's gains.
  • Core IP is still moving sideways. Employment in the manufacturing sector is also moving sideways.
  • Renewed weakness in oil sector could again spillover to other manufacturing sectors.
  • Indeed, ISM survey and Conference Board leading indicator both weakened recently, suggesting there's no upside for industry in the near term.


August industrial and manufacturing production gave back part of July's gains. Core IP is still moving sideways.


Employment in manufacturing and core manufacturing in August gave back all of July's gains. Jobs in the manufacturing sector moved sideways so far this year.





Both the ISM and Markit PMI surveys weakened recently, suggesting there's no upside for IP in the near term.



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


Renewed weakness in oil sector could again spillover to other manufacturing sectors.






Paulo Gustavo Grahl, CFA

Random comments on macro data. Views are my own. Except when they aren't.