January Industrial Production at All-Time High

The record level of production is a strong indication that U.S. manufacturing has made a complete recovery from the financial collapse that started in late 2008. Reshoring has been a major driver of the improved state of manufacturing.

Steven Kline, Jr.

Chief Data Officer, Gardner Business Media

According to the Federal Reserve, the durable goods industrial production index was 99.3 in January 2013. This represents a 4.1% increase over the production level of January 2012. Also, this is the highest level ever for the durable goods production index in the month of January. This is important to note because industrial production is highly seasonal. The record level of production is a strong indication that U.S. manufacturing has made a complete recovery from the financial collapse that started in late 2008. Reshoring has been a major driver of the improved state of manufacturing.

While January production hit a record level, the rate of growth in durable goods production continues to slow. The 4.1% month-over-month rate of growth was the slowest since September 2010, which was only the second month of growth after the financial collapse. The slower month-over-month rate of growth is leading to a slower annual rate growth. The annual growth rate is now down to 7.1% from a recent peak of 8.1%. However, this rate of growth is still more than double the average annual rate of growth in durable goods production.

The best leading indicator for durable goods production is capital goods new orders. The rate of change in new orders has fallen precipitously and has actually contracted the last two months. This trend in capital goods new orders is pointing towards to further slowing in the rate of growth in durable goods production.