This is Where Industrial Production Normally Meets a Recession
Painful – that’s how you can describe the slew of recent US economic data. And today’s data dump was even worse.
On a regional level, there was the Empire State Manufacturing Survey. The Current Activity Index plunged to the lowest level since March 2009. The last time it had squeaked into positive territory was in July 2015. The Expectations Index plummeted by an unprecedented 29 points, also to the worst level since March 2009.
Thank God it’s only regional. But wait…. California’s Inland Empire Purchasing Managers Index, which tracks manufacturing in the Inland Empire, started losing its grip in August and in December plunged to the lowest level since the dark days of February 2009.
The report pointed to the link between the index and the overall economy in the region: Historically, when the PMI drops below a certain level, as it did in December, and stays there for three months, it coincides with a recession in the region’s overall economy [“The Sky is Falling” on California Manufacturing, Worst since February 2009, Might Kick Regional Economy into Recession].
Then retail sales for December dropped. Turns out, holiday sales brought no respite to the beleaguered brick-and-mortar retailers [read… Wal-Mart Rubs Salt on Deepening Retail Wounds].
And the final shoe to drop today, in a gratuitous sort of way, was the Federal Reserve’s index for industrial production. It fell 0.4% in December, after having already fallen 0.9% in November and 0.2% in September, while August had been flat. Year-over-year, December was down 1.8%.
A year-over-year drop of this magnitude (-1% or more) has been linked to a recession every time it occurred over the past six decades. You have to dig into the early 1950s before you find the last two occurrences where this kind of drop in industrial production was not associated with a recession.
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