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By New_Deal_democrat January 17, 2018 10:38 am
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Industrial production, retail sales complete strong quarter

By now I'm sure you've read elsewhere that industrial production rose strongly in December.  That's certainly true, and to put it in perspective, here is the overall number (red) together with manufacturing (blue) and mining (including oil and gas) ( green): 







All of these numbers have risen strongly since the bottom of the "shallow industrial recession" that ended in early 2016 when the decline in the price of oil and gas stopped.



Here's a look at the same data YoY:







Apropos of a post I wrote last week, while this is pretty good, it still does not compare with the strong growth of industrial production during the booms of the laste 1960s and 1990s:







Although we don't have the final number for personal income in December, industrial production joins employment and retail sales in having a strong 4th quarter.  The below graph shows all three quarter over quarter for the last two years:







All of these picked up stoutly after the hurricanes, and I wonder if some of the strength in the quarter just ended isn't payback for the interruptions (and the need to repair) following those weather events.



The strong growth in industrial production shows the wisdom of paying attention to the average of the regional Fed surveys and the ISM manufacturing index, and in particular the new orders components of those indexes.  They turned up in 2016 in advance of the bottom in production, and have been very strong during the second half of 2017. The simple fact is, THEY LEAD. Those who complained that they were soft data once again failed to understand this vital point.



Another point to make is that once again the Weekly Indicators and their forecasting of near term strength over the last half year have also been correct -- and timely. They continue to forecast strength through the first half of this year.  Once we have the Q4 GDP report next week, I will look ahead to the second half of 2018.

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