Industrial Production in the United States increased by 4.9% year-over-year in August 2018. That’s the best for American industry in 92 months going all the way back to December 2010. Hurray for the boom.
As with retail sales, August was in position for the best possible monthly comparison. Unlike retail sales, IP has another month of favorable base effects given that Harvey and Irma had shut down a lot of heavy capacity also last September in addition to August.
More than the mathematical quirks of how statistics conform to a calendar, there are indications things are slowing down. It’s nothing like Europe or several EM economies, those that are already contracting. Instead, the growth rate over the last few months as compared to those prior is materially lower but still positive.
Accounting for this difference isn’t difficult. Between September and December 2017, the aftermath of Harvey and Irma contributed much to the increase, as did the pre-trade war period in 2018 up to around April. From August 2017 forward to April 2018 (8 months), US IP advanced at a 6.5% annual rate.
That would have been a 20th century kind of increase had it continued. Unfortunately, since April, IP is up at a very 21st century/post-crisis slowdown kind of rate. At less than 2% over the last four months, it’s more consistent with what we’ve been seeing elsewhere around the world in the global goods trade.
That’s really the big difference, too. US IP is being heavily influenced to the high side by crude oil production. In manufacturing, especially the production of consumer goods, the US “boom” isn’t really one. The manufacturing index is up 5.0% from the low, but that’s across more than two years, not one (2.2% annual rate).
It continues to be the auto sector that is holding back American industry. Motor Vehicle Assemblies (MVA) came in at a seasonally adjusted annual rate of 11.54 million in August. While up from 10.6 million in July, the prior estimate was revised way down from 11.18 million. There continues to be serious uncertainty in the auto business, as suggested by the uncertainty in the estimates for the auto business.
