Friday morning the Federal Reserve released figures that showed its industrial production index fell 1.2% in October to 143.6 from 145.3 in September and 154.1 last October. Production had fallen 1.1% in September and 0.6% in August.
According to Newport Communications Senior Economist Jim Haughey, this is not a surprise.
“This huge drop can only be interpreted with the inventory and sales data for the same period, but they are not yet available,” he says. “However, early signs suggest that consumer goods purchases continue to expand very slowly and that inventories did not accumulate in October. If so, then the big production decline suggests that the September shock to the economy has already been absorbed so production can get back on trend. Unfortunately, that trend is a month-to-month decline of 0.2 to 0.4% into the winter until the last of the surplus stocks are used up.”
He says typical of this late stage of the business cycle, consumer packaged goods production is barely declining, while equipment and durable goods production is plunging.