January 17, 2025

In December, following the resolution of a work stoppage at a major aircraft manufacturer Industrial Production increased 0.9 percent while manufacturing output rose 0.6 percent. At 103.2 percent of its 2017 average, total IP in December was 0.5 percent above its year-earlier level. Capacity utilization stepped up to 77.6 percent, a rate that is 2.1 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 increase in the Industrial Production growth rate and capacity Utilization signaling a sustained economic expansion or a temporary blip? Our forecast points to a turning point during the second quarter, at which point do we expect Industrial Production to begin accelerating. The data points to a surge or acceleration of industrial production during the second and third quarters and then levelling off during the 4th quarter. We are looking for industrial production to approach a 2% annual rate by the end of 2025.

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