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Industrial production continues strong growth

Industrial production continues strong growth

If real retail sales (reported on in the prior post) is the best proxy for the health of the consumer, Industrial production, the King of Coincident Indicators, is the same for production. 

And the news there was also very good. Overall production rose 0.9% in December, and the manufacturing component rose 1.0%. As a result, overall production is only -1.9% below its level just before the pandemic hit last February, while manufacturing is only down -0.8% since then:

At the current pace, manufacturing should be *up* YoY in one month, and overall production in two.

Manufacturing, along with housing, has been the best sector of the economy since the bottom of the pandemic recession last April. It continues on a very good trajectory now. As I mentioned earlier with retail sales, this is more evidence of an economy primed to soar once the pandemic is under control.

Euro Area ‘Hard Data’ Catching Up with the ‘Soft Data’ – Industrial Production

by Rebecca Wilder

Euro Area ‘Hard Data’ Catching Up with the ‘Soft Data’ – Industrial Production

Euro area industrial production (ex construction) declined 0.8% in the month of April. Across the major sectors, the largest decline occurred in capital goods; however, the trend in consumer and intermediate goods is worse than that of capital goods.

The regional divergence is clear, as the two-month trend in industrial production – I use the two month trend since this series is quite volatile month-to-month – is strongest in Luxembourg, Slovakia, Slovenia, and Ireland, and weakest in the Netherlands, Spain, Estonia, and Greece.  (much more below the fold)

Another way to look at the divergence is to plot German production against the rest of Europe. It’s evident that Germany, with its large 35% weight in this index, is propping up the average. German industrial production is 10% above 2005 levels, while the Euro area ex Germany’s industrial production is 8% below levels in 2005. That’s an 18 ppt divergence.

Finally, a comparison to the US is illustrative. The US industrial sector is outperforming that in Europe, as production continues its positive trend with relatively easy fiscal and monetary policy accommodating the private sector’s desire to save. The US production base is 2% above that in 2005, while that in the euro area (including Germany) is 2% below.

In all, the euro area April industrial production release points to further divergence in growth prospects and a very weak start to the second quarter of 2012. The ‘hard data’ seems to be catching up with the weak ‘soft data’, like the PMIs (see Edward Hugh’s summary on the Euro area PMI).

Rebecca Wilder

crossposted with  The Wilder View…Economonitors