Industrial production declined 0.3 percent in September. Negative revisions lopped off another 0.5 percent.
The Bloomberg consensus was a decline of 0.1 percent. Factoring in negative and positive revisions the decline was about 0.5 percent.
Blame the Hurricanes
The Fed blames the hurricanes in its September Industrial Production Report.
Industrial production (IP) decreased 0.3 percent in September after advancing 0.3 percent in August. A strike at a major producer of civilian aircraft held down total IP growth by an estimated 0.3 percent in September, and the effects of two hurricanes subtracted an estimated 0.3 percent. For the third quarter as a whole, industrial production declined at an annual rate of 0.6 percent. Manufacturing output moved down 0.4 percent in September, and the index for mining fell 0.6 percent. The index for utilities gained 0.7 percent. At 102.6 percent of its 2017 average, total industrial production in September was 0.6 percent below its year-earlier level. Capacity utilization edged down to 77.5 percent in September, a rate that is 2.2 percentage points below its long-run (1972–2023) average.
I suppose that hurricane story makes some sense, but then last month’s story doesn’t.
On September 17, I reported Industrial Production Rises Strongly from Steep Negative Revisions
In August, Industrial Production jumped a reported 0.8 percent. Today we see that the strong rebound in August was really only 0.3 percent.
However the Fed did take away some of the steep negative revisions to July.
We have had substantial revisions and not all of them are hurricane related.
Industrial Production Since 1999
Industrial production is now a mere 0.35 percent above the level in December 2007. Industrial production peaked in September of 2018 at 104.10.
Manufacturing production is 6.3 percent below the level in December 2007. A recession started in January 2008.
December of 2007 is still the all-time high for manufacturing.
Retail Sales
This morning I commented Retail Sales: Consumers Spend More on Food, Less on Gasoline and Cars
In September, retail sales rose 0.4 percent, up 0.3 percent inflation adjusted. Here’s where consumer spent their money.
Please check it out.
Very OT but I think very cool.
I photographed the comet two night ago.
Comet Tsuchinshan-ATLAS, Joshua Tree National Landmark
https://mishmoments.com/2024/10/17/comet-tsuchinshan-atlas-joshua-tree-national-landmark/
that is awesome. one of our favorite parks in this country. i really miss the desert night sky.
Really nice picture. The comet will be back again in 80,000 years, but who will be taking pictures?
walt disney and ted williams
Elon Musk from Mars for a different angle.
1M TNX was rising sharply in Oct after the Fed cut rates. It closed July/Aug gap. It might cont to rise to the 4.2 area before falling down. The 1M trend is down, unless it change. DET10Y is in a 3 months trading range between 2 and 2.3. Lower highs/ lower lows. US10Y-DET10Y is 1.9. China is dragging Germany down. Gravity between the US and Germany will pull US10Y down. The Fed responds to gravity laws in Sept.
automation and outsourcing manufacturing to other countries like China and Mexico is why industrial production (after adjusting for inflation) peaked around 2007 (and 7 years after Bill Clinton signed the China trade agreement and 14 years after he signed NAFTA)
look at how many American driven cars are manufactured in northern Mexico
the Chicoms are trying to use those northern Mexico factories to sell cars to America and Canada
that’s why real wages were down for fifty years.
The US manufacturing data supports it. The Chinese economy and its 2020-2025 housing bubble, perhaps an order of magnitude worse than the global 2007-2009 housing bubble, are in a deflationary implosion. Expect the unexpectedly expected. The initial 6 trading days of the initial phase of great global equity, commodity, and crypto crash of 2024-2025 is underway.
Sinwar death is a gift for Biden/Harris and SPX. The Chinese deflation will reduce
our trade deficit. It will increase the GDP, but reduce demand for CL since China is the biggest oil consumer. Iran will have to look for new customers after increasing oil production.
An army military school squad discovered 3 suspicious terrorists in Rafa. They engaged. One of them escaped to the next building. Photograph #1 : a suspicious terrorist wrapped like an Egyptian mummy, sitting in a spacious living room on an armchair, trying to hit a drone with a wooden stick. Photograph #2 : Sinwar corpse in a building rubble, exposed, without a wrap. Tel aviv elite will never forgive Bibi for being a giant, who killed both Nasrallah and Sinwar. They will pursue him with trials and inquiries until his death.
How much do utilities contribute to the total production number? Has there been an increase in private (non-reporting/non-state regulated) power production?
Gee, maybe working on getting companies to make stuff here would be a good idea.
Build more bombs. Yeah, that’s the ticket.
China fell down and cannot get back up. The jump in stock prices looks more like just a short squeeze.
Tariffs must be hurting. Trump put them in. Biden left them and actually increased tariffs I believe. Now Europe is getting China tariff happy.
The next global growth industries appear to be green energy and AI. The U.S. and Europe want to put tariffs on any Green energy coming out of China (solar panels and EVs). The U.S. is going to try to ban any AI chips to China which will only strength the U.S. lead in AI.
The US lead in AI is actually shrinking, not widening.
The reason is the ban to China has forced them to create their own chips after being able to buy them. Suddenly China has almost caught up FAR faster than anyone imagined.
Once they catch up or surpass the US, a Taiwan invasion or even just a feint that causes the Taiwanese to blow up their chip factories to deny them to China will leave the US on the outside looking in because absolutely no modern chips are made here…
Apple’s A16 is being made in the Arizona TSMC plant. It’s ramping up to make other chips too, and just in time.
Intel is trying to get their fans modernized after wasting years on stock buybacks. I don’t know what AMD is doing.
bought TSM 2 days ago………….been trading that puppy for ages……….the cashflow is surreal. glad my old town for 13 years of phoenix got that deal from our hero sleepy joe. that’s a joke jack. biden and harris and trump and vance are clowns of a crumbling clown empire of debt and warfare……….
Looks to me like China’s economic weakness is much more related to collapse of their construction boom and house-price bubble, rather than tariffs.
china is in stage of development of booms and busts like usa was in 1800s.
“Huge Negative Revisions” // I’m shocked, just shocked! ☮️✝️
Philips is closing it’s California refinery in Wilmington. Refinery capacity in California is shrinking again. This just after Newsom signed a bill requiring refiners to maintain a surplus reserve, to prevent price spikes during maintenance shutdowns.
It’s a wonderful bill (ABX2-1)…refineries can now only “blow up” if planned and approved in triplicate. No more pesky price disruptions.
These laws provide the state more power thus extracting campaign contributions to those in power in order to have inputs in rule-making, thus reinforcing single-party rule.
Fortunately, CA does not ship Gasoline to other states so stupidity affects CA only. Of course, P66 says the Wilmington Refinery closure is “unrelated” to this new law (as they were told to say).
Next up is directive 10-189.
CA Leg Analysis Excerpt:
Unexpected disruptions and refinery facility outages can result in reduced supply and price increases. California has no ability to deliver gasoline into the state via pipelines, as the existing pipelines only deliver gasoline and other refined fuels out of the state. As a result of California’s isolated gasoline fuels market, unexpected and unplanned disruptions on the system, including unplanned and planned refinery outages, can impact the supply, which often affects price. This was the situation after the unexpected outage at the then-Exxon Mobil Torrance Refinery in February 2015 due to an explosion at the facility that resulted in an extended outage. Gasoline prices were immediately affected, as prices increased within a week of the outage.
“Unexpectedly” was used quite often ~ 16 years ago.
Hmm, and all this time I thought the U.S.’s main form of production that matters was dollars?
Devastating numbers for the incumbents
Well, the current incumbent Congress (that makes laws that affect the economy) is split between a Democratic Senate and Republican House. Maybe that will change soon?
But I guess ‘devastating’ depends upon what numbers are being projected, and from what viewpoint. Did you see the recent upwards revisions to GDP and GDI since 2022? They are very positive and quite large. I’m hoping Mish will have a blogpost soon to dissect that change, where it came from, and why the economy did so much better than initially thought
The IDF spilled Sinwar brain. Israel celebrate. Iran might have escaped. SPY made a new all time high, but dropped < Oct 14 high to close a gap.
Isn’t AI great?
18Y/19Y rookie soldiers in military school suspected something. Soldiers intuition. No AI. But the Shin Beth focused on this area. Sinwar was hiding with Rafa division, Khan Yunis brigade commanders and an UNRA friend. A rookie tank commander blue up Sinwar hiding place. His teeth/jaw confirmed his ID. DNA fit. His body was shawn to the Israeli media and to the Arab world. Nasrallah confirmed his arrival. No hostages. But the six hostages killed a month ago were with Sinwar in the tunnel. He ordered their execution.
Biden, Bibi and the Ayatollah might retire in 2025.
Dictators don’t retire from office. They only die in office.
Bibi might retire in 2025 as the leader who killed Nasrallah and Sinwar.
bwaaahhhhhhhh. bibi will end up in prison most likely.
nice fantasy you got going. israel is a goner when amerika pulls out. which is inevitable as we go the way of all empires. the ottomans, the british and now amerika rules that part of world. zion is just our weak and abused little pawn we have near the petro dollar source………….
My understanding is Israel was originally established as an outpost to provide intelligence for the British empire. I don’t know whether they are the abused or the abuser.
“We don’t need no st-e-e-e-nking ‘industrial production’!”
We just need AI services.
“Unexpectedly Declines”… seriously?
Boeing strike in September… aircraft parts?
C-19 and the GFC are diametrically opposed. You could sum it up that velocity dropped in the GFC, and velocity has risen in C-19.
I.e., there has been no nonbank disintermediation:
https://fred.stlouisfed.org/series/DDDI03USA156NWDB
The question I have is how many asset loans are on SIB’s books of nonbank institutions or have become CLOs that has increased the velocity?
Equally important, what happens when the collateral on PE and BlackRock, etc. books as well as the pension funds that possess the CLOs become systematically toxic? My thoughts are pensioners take it in the shorts but SIBs are bailed out. Rinse and repeat….