US industrial production ambiguous due to Sandy

16 Nov 2012 by Jim Fickett.

Today the Federal Reserve released industrial production figures through October. At first glance, it would appear that industrial production is rolling over, a result that would be quite worrisome:

But the drop in October is due to a special circumstance, hurricane Sandy, and does not really reflect the state of the economy generally:

Industrial production declined 0.4 percent in October after having increased 0.2 percent in September. Hurricane Sandy, which held down production in the Northeast region at the end of October, is estimated to have reduced the rate of change in total output by nearly 1 percentage point.

In other words, the Federal Reserve thinks that without the storm industrial production would have increased significantly rather than falling. So we will have to wait a bit more to see what the current trend really is.

Even with the effects of the storm, the year-over-year change still looks reasonably healthy, so there is no evidence here of incipient trouble.