October Industrial Production 1.4% More than One Year Ago

The consumer durable goods industrial production index was 94.2 in October 2012. This was the highest level of production since June 2012. But, since industrial production is very seasonal, the rate of growth compared to one year is a more important measure. Production was just 1.4% higher in October 2012 than it was in October 2011. This is the slowest rate of month-over-month growth since July 2011 and the fourth lowest since December 2009. Since the first half of 2012, the rate of month-over-month growth in industrial production has slowed dramatically. Annually, the rate of growth peaked in August, but the growth rate is still at a historically high level. Because consumer durable goods industrial leads capital equipment spending by 12-18 months, we should still expect to see strong machine tool sales in 2013.

A good leading indicator for consumer durable goods industrial production is consumer durable goods spending. Real consumer durable goods spending reached a new all-time high in September. The month-over-month rate of change in spending in September was 8.2%, which is well above the average rate of growth. Also, the annual rate of growth in spending has accelerated the last five months. This indicates that consumer durable goods industrial production should continue to remain at a high level and further growth in 2013.