The Fed’s Industrial Production Report is a Disaster, Cyclical Data Signals Recession – Mish Talk

Industrial Production data from the Fed, chart and percentages by MishPlease consider the Fed’s Industrial Production and Capacity Utilization Report for November. Industrial production declined by 0.2 percent in November. Decreases of 0.6 percent for manufacturing and 0.7 percent for mining were partly offset by a rebound of 3.6 percent for utilities following three months of declines. At 104.5 percent of its 2017 average, total industrial production in November was 2.5 percent above its year-earlier reading. Capacity utilization moved down 0.2 percentage point in November to 79.7 percent, a rate that is 0.1 percentage point above its long-run (1972-2021) average. I prefer my breakdowns over the Fed’s because utilities are too influenced by weather changes and cyclicals are what really matters. Clean Sweep for Cyclicals Manufacturing Durable Goods: -3.79 PercentMotor Vehicles and Parts: -2.84 PercentConsumer Durable Goods: -2.12 PercentManufacturing: -0.61Aircraft and parts rose 1.85 percent but aircraft lead times are huge. That’s not a cyclical component of GDP. Craig Fuller Chimes InFuller is CEO of Freight Waves and American Shipper. Most Important Chart in Macro.Cyclicals including housing and durable goods only constitute ten to fifteen percent of GDP, but the swings account for variations between growth and recession according to Eric Basmajian at EPB Macro.A Big Housing Bust is the key to Understanding This Recession Also recall my July 14 post A Big Housing Bust is the Key to Understanding This Recession Every recession since 1952 has had significant declines in cyclicals defined as durable goods and residential construction. Existing Home Sales Decline 9th Month, Down Another 5.9 PercentExisting home sales from the National Association of Realtors via St. Louis FedPlease note Existing Home Sales Decline 9th Month, Down Another 5.9 PercentExisting home sales fell another 5.9 percent in October. They have declined every month this year except for January. Housing is one of the key drivers of durable goods. Think appliances, windows, cabinets, floors, light fixtures, etc.. Auto sales are also cyclical. Note that Motor Vehicles and Parts production fell 2.84 percent in November. The Fed Projects Interest Rates Higher for Longer at Least Through 2023FOMC projections from the Fed, highlights by MishYesterday, I commented The Fed Projects Interest Rates Higher for Longer at Least Through 2023Scroll to ContinueNote the huge change in GDP forecast from September.Range Key Points The projected GDP range for 2023 is -0.5 to 1.0 percent, down from -0.3 to 1.9 percent.The projected interest rate range for 2023 is 4.9 to 5.6%, up from 3.9 to 4.9 percent in September.Across the board this is a decidedly weaker economic forecast and a much more hawkish interest rate forecast. Q: Did the Fed have advance data? A: Of course they did. They produce the Industrial Production report.Retail Sales: With Food and Shelter Soaring, Who Can Afford Anything Else? Earlier today I commented Retail Sales: With Food and Shelter Soaring, Who Can Afford Anything Else? Month-Over-Month Advances and DeclinesFood Service : +0.9 percentFood Stores: +0.8 percentGas Stations: -0.1 PercentGeneral Merchandise: -0.1 PercentExcluding Motor Vehicles and Gas: -0.2 PercentExcluding Motor Vehicles: -0.2 PercentNonstore (Think Amazon): -0.9 PercentMotor Vehicles: -2.3 PercentDepartment Stores: -2.9 Percent Food and Food services are the only areas where consumers increased spending in November.Don’t Expect Big Declines in Rent Also on the inflation front, please see Ignore the Pundits, Don’t Expect Big Declines in the Price of RentJanet Yellen, President Biden, and all the other economic cheerleaders aside, please note declining sales and declining production. Expect a Long Period of Weak Growth, or Not It’s Labeled RecessionOn August 19, I commented Expect a Long Period of Weak Growth, or Not It’s Labeled RecessionAnd whether that’s exactly what the Fed’s revised forecast now says. Recession? Call it a recession, or don’t call it a recession. Either way it will not be good for corporate earnings. If you thought the stock bottom was in, you might wish to reconsider. This post originated at MishTalk.Com.Thanks for Tuning In!Please Subscribe to MishTalk Email Alerts.Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.If you have subscribed and do not get email alerts, please check your spam folder.Mish

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