Y/Y Industrial Production Ex-Energy Bull Up 2.5%, But Still Below 2007 Peak

The Fed’s actual, not seasonally adjusted (NSA) Industrial Production Index was up 3.2% over the past 12 months after declining by 2.1% in April from March. The prior 10 year average decline for the month is -1.7%. Last year, the April decline was only 1.1%.

Industrial Production Index- Click to enlarge

This year’s April performance was worse than both last year and the 10 year average. However, the current number may have been a giveback for a much stronger than average performance in March, which had a 1.5% gain against a 10 year norm of a decline of 1.4%. The yearly rate of change at +3.2% is consistent with the growth rate of the past 3 years.

The industrial production index is based on units of production and therefore need not be adjusted for inflation. As I have shown in a prior analysis, the gains have been skewed by energy production. If those components are removed, net industrial production ex energy remains below 2007 peak levels. Ex-energy industrial production rose just 2.5% over the past 12 months. The growth rate has been declining since 2010 in spite of all the Fed’s money pumping… Or because of it because it encourages financial engineering at the expense of real investment!

Industrial Production Ex Energy- Click to enlarge

Perhaps the biggest question is, “Can the energy boom be sustained at this pace?” I think the answer should be obvious.

Energy Boom or Bubble- Click to enlarge

And the next question is, “What happens to the US economy when this begins to moderate?”

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.

Get Access