Industrial Production Up 3.2%, But 2.5% Ex Raging Energy Boom

Share!Tweet about this on TwitterShare on FacebookShare on LinkedInEmail this to someonePrint this page

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

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

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

Energy Boom or Bubble- Click to enlarge

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

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today.