By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive an email as pertinent data are released.

October Industrial Production Shows Some Improvement Within a Deteriorating Trend

Industrial production declined by 0.2% in October, though August growth was revised up by that much. This is actually a better net result than the outright declines we have been getting here for most of this year. Details within the report indicate that all of the October output decline came from the oil patch and utilities, as manufacturing production actually rose 0.4%.

While this month’s industrial data actually weren’t so bad, it is not yet time to break out the party hats and champagne. Economic data fluctuate from month to month, and it is likely that this month’s improvements, such as they were, were a momentary fluctuation upward within a (mildly) downward trend. The accompanying chart bears out this point, although we must admit that the recent factory bounce (green line) is somewhat encouraging.

Our take is that the factory slowdown is being driven by flagging capital spending on equipment and declining exports. As you can see in the chart, factory output was soft in 2012 and 2013 before spurting in 2014, only to fall back to form this year. It is also the case that both capital spending and exports saw weak growth in 2012 and 2013, before bouncing last year. There is more to the 2015 industrial sector woes than merely a strong dollar and low oil prices, and we are inclined to think that softer industrial data will resume in coming months.

As for oil, total industrial production in September and October was indeed held down by emerging declines in US oil output. Even though oil prices have been falling since July 2014, US oil production climbed through March 2015 and then held largely stable through late-summer. However, it has finally declined since then, and this trend too is likely to continue.

Industrial Production, Manufacturing
Industrial Production, Manufacturing Chart
Chart Source: Federal Reserve Board. As of 31 Oct 15.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.