April 24, 2025

The Industrial Production Index decreased 0.3 percent in March but increased at an annual rate of 5.5 percent during the first quarter. At 103.9 percent of its 2017 average, the total Industrial Production Index in March was 1.3 percent above its earlier level. The US Capacity Utilization declined to 77.8 percent, a rate that is 1.8 percentage points below its long-run (1972–2024) average. The capacity utilization figure suggests that there is room for non-inflationary, sustained expansion. A potentially bullish outlook. However, the decline in Capacity Utilization is consistent with an economic slowdown, not a bullish outlook. Perhaps the Industrial Production Index provides a way to identify which of the two possibilities is the most likely outcome. The estimated probability of the Industrial Production Index outperforming the trailing four quarters reaffirms our conclusion of a sustained expansion as reflected by a likelihood averaging better than 50% for the estimated trailing four quarters industrial production index. We are looking for industrial production to approach a 2% annual rate by the end of 2025.

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