No sustained rebound in industrial production

Industrial Production benefited from a hurricane rebound in October 2017, rising 2.9% above October 2016. That is the highest year over year growth rate since January 2015.

Note that from late 2014 to March 2016, industrial production was contracting, remaining at close to that low level until November 2016. The election certainly changed perceptions, at least for a while.

The favorable base comparison, however, will soon begin to wane.

The fact is that industrial output is now about even with the peak registered in November 2014, and about the same level obtained just before the end of the previous cycle, in November 2007.

In other words, that´s the state of an economy that has only muddled along for the past 10 years, not an economy that has in any sense recovered.

There are those who blame the more recent pattern of industrial production on “dollar strength”.

More generally, however, we can put the “blame” on the behavior of monetary policy as gauged by nominal spending (NGDP) growth.

Since there´s a clear tightening bias to monetary policy, with the Fed in deep discussion about how to adapt the monetary framework to battle the next downturn, there´s no reason to believe, as officials have been fond of saying, “we’re finally seeing the sustained rebound in global growth that we’ve long been hoping for.”


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