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Posted by: 21. May 2012

Industrial Production Growing at Fastest Rate Since June 2010

 
 
The consumer durable goods industrial production index was 94.9 in April 2012. This is the index’s third highest value since February 2008. The only two months higher in value were February and March of this year. April industrial production was 13.3 percent higher than the production level in April 2011. This is the fastest growth rate since June 2010. Three of the last four months, the one-month rate of change has been above 10 percent. This is pushing the annual rate of change to grow faster as well—it has done so each of the last six months.
 
This means that machine shops are seeing really good business at the moment. And, it is why capital equipment and tooling continue to be in high demand.
 
A good leading indicator for consumer durable goods industrial production is consumer durable goods spending. Spending is at the highest level it has ever been. The one-month rate of change shows consistent growth, but the annual rate of change has shown slower growth each of the last seven months. While the annual growth is slower, it is still at quite a fast rate. Because the growth is still relatively fast and reshoring is a real phenomenon, industrial production is growing faster even when the leading indicator says it should be slowing down (there is very tight historical relationship between spending and production). The divergence from the historical relationship can continue for some time due to the specifics of this cycle. But, if consumer durable goods spending slows enough, then it will start to be a drag on production.
 
To see more information on industrial production and its leading indicators go here.

 

 

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