July 17, 2024

Industrial production increased 0.6 percent in June. For the second quarter of 2024 industrial production increased at an annual rate of 4.3 percent. The industrial production index reversed the previous two quarters’ downward trend. At 104 percent of its 2017 average, total industrial production in June was 1.6 percent above its year-earlier level. Also, in June 2024, the Capacity Utilization increased to 78.8 percent, a rate that is 0.9 percentage points below its long-run (1972–2023) average. The capacity utilization figure suggests that there is room for non-inflationary, sustained expansion. But is the Industrial Production growth rate robust enough to preclude a significant slowdown as the year progresses? Rather than speculate as to the market outcomes and the policy responses, assuming that the futures market contains information as to the policy response, we can estimate the likelihood and strength of the continued market recovery by evaluating the historical relationship between the futures market and the Industrial Production Index. We express the likelihood of a sustained acceleration and/or deceleration of industrial production, as the probability that the future quarter will outperform the previous quarter.The estimated probability of the Industrial Production Index outperforming the trailing four quarters suggest a steady slowdown of the industrial production growth rate over the next four quarters. In an election year, such an outcome is not welcome outlook for the incumbent.

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