Wednesday, April 15, 2015

U.S. Industrial Production Falls in March


Source: Morath, Wall Street Journal

This quarter marks the first time U.S. industrial output has declined since the end of the recession (2nd quarter of 2009). This specific economic indicator measures output from manufacturing, mining, and utility industries, and historically, has been helpful in forecasting GDP growth and general economic prosperity. The Fed has stated that this decline is due to the recent "drop in oil and gas well servicing."

Decreasing production is never a good sign for the economy, but it's a bit too early to tell whether this decline is just part of the natural cycle, or an additional symptom of a stalling economy. GDP, consumer spending, investment, have all been slowing recently. However, the oil industry is seeing a bit of a rebound (link), which could be a sign that this slump is just temporary.



Do you think that the industrial production numbers this quarter should be something to worry about? Take a look at the chart above for historical data.



2 comments:

Alex Medwid said...

I don't think that the current state of the economy is problematic. The only point on the graph higher than the current quarter is the previous quarter.

Moreover, the primary two causes for the decline mentioned in the article are oil issues and the strengthening of the dollar. Both of these are relatively manageable issues. The fact that causes have even been identified so soon indicates that this problem is unlikely to resemble the recession in any way.

Tiffany Chen said...

Looking at the Industrial Production Index provided by the Federal Bank of St. Louis, I want to say that this drop is not anything significant to worry about as there has been a general upward trend in these numbers since the 1920s given the continuous growing presence of industrialization in our country. However, since the Fed has stated that this decline is caused by decreases in oil and gas well servicing, I think that this decline might actually continue due to pushes toward cleaner energy sources. If our country's agenda in fighting climate change takes off and succeeds, such oil and gas well servicing should continue to decrease in place of renewable energy or natural gas.