The Big Four Recession Indicators: Industrial Production Hits Record High in February

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which it bases its decisions. This committee statement is about as close as it gets to identifying its method.

There is, however, a general belief that there are four big recession indicators that the committee weighs heavily in their cycle identification process. They are:


The Latest Indicator Data: Industrial Production

Industrial production jumped 0.75% in February to a new record high, surpassing the expected 0.2% increase. Compared to one year ago, industrial production is up 1.4%.

Here is the overview from the Federal Reserve:

Industrial production (IP) increased 0.7 percent in February after moving up 0.3 percent in January. Manufacturing output rose 0.9 percent, boosted by a jump of 8.5 percent in the index for motor vehicles and parts. The output of manufacturing excluding motor vehicles and parts increased 0.4 percent. The index for mining gained 2.8 percent, and the index for utilities decreased 2.5 percent. At 104.2 percent of its 2017 average, total IP in February was 1.4 percent above its year-earlier level. Capacity utilization stepped up to 78.2 percent, a rate that is 1.4 percentage points below its long-run (1972–2024) average. [view full report]

The chart below shows the year-over-year percentage change in industrial production since the series inception in 1919. The current level is lower than at the onset of 14 of 18 recessions over this time frame of nearly a century.

Industrial Production year over year