Industrial Production data from the Fed, chart by Mish.
The Fed blames the weather for weakness in Industrial Production and Capacity Utilization in 2024.

Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 percent. Both gains partly reflected recoveries from weather-related declines in January. The index for utilities fell 7.5 percent in February because of warmer-than-typical temperatures. At 102.3 percent of its 2017 average, total industrial production in February was 0.2 percent below its year-earlier level. Capacity utilization for the industrial sector remained at 78.3 percent in February, a rate that is 1.3 percentage points below its long-run (1972–2023) average.

Q: Is the Fed just discovering the January weather?
A: It appears so.Industrial Production Revisions
January Revisions

O.K. I get that warmer than usual weather might cut utility demand in January.But is warmer than usual weather responsible for hugely negative revisions everywhere else except aircraft and parts?
Industrial Production Components Percent Change Year-Over-Year
Aircraft and parts, and motor vehicles and parts are both prone to major swings. Here is a look at the chart with those components stripped out.Industrial Production and Manufacturing Percent Change Year-Over-Year
Stripped of the more volatile components, the trend is quite clear, and it isn’t pretty.Durable goods manufacturing has been negative year-over-year for 9 consecutive months dating to June of 2023.Somehow, I sense this is not weather-related.Has Industrial Production Peaked This Cycle?That was my lead question. And my answer is yes. Here are the peak dates.

I am sure glad Boeing has its act together because aircraft is the only thing holding up.Then again, as I have noted At Boeing, Speed, Not Safety, Is the Company’s Top ConcernThe above numbers are so miserable and housing has been so miserable that I wonder how we avoided recession (assuming we really did avoid recession).Gross Domestic Income (GDI) suggests we did have a brief mild recession.Real GDP and GDI in Billions of Dollars
Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing. The BEA has not yet released GDI for the 4th quarter of 2023.But we can see that GDI for the third quarter is lower than it was a year prior. That usually only happens in recessions.The gap between GDP and GDI is one of the largest ever. I expect negative GDP revisions. If we skirted a recession, it was not by much.What About Jobs?Another seemingly strong jobs headline falls apart on closer scrutiny. The massive divergence between jobs and employment continued into February. Nonfarm payrolls and employment levels from the BLS, chart by Mish.Payrolls vs Employment Gains Since March 2023

For more details of the weakening labor markets, please see Jobs Up 275,000 Employment Down 184,000Has the US Consumer Finally Waved the White Flag on Spending?The answer to the question appears to be yes, starting October of 2023. Six pictures of real vs nominal advance retail sales tell the story. Real and nominal advance retail sales. Real sales are inflation-adjusted by the CPI.For discussion, please see Has the US Consumer Finally Waved the White Flag on Spending?There are economic cracks in spending, cracks in employment, and cracks in delinquencies.But there are no cracks in the CPI. It’s coming down much slower than expected. And the PPI appears to have bottomed.Repeating what I said yesterday, Add it up: Inflation + Recession = Stagflation.More By This Author:Has The Us Consumer Finally Finally Waved The White Flag On Spending? Producer Price Index (PPI) Much Hotter Than Expected In FebruaryFamily Dollar And Dollar Tree Will Close 1,000 Stores