Monday, September 12, 2011

July 2011 Industrial Production: More Bad News

Following on the poor trade numbers, industrial production for July didn’t offer much better comfort (log annual and monthly changes; seasonally adjusted; 2000=100):



Both the annual and monthly growth numbers have been negative in three of the last four months, much worse than situation last year when the global economy endured a similar slowdown.

While some of the negative growth came from mining, most of the output losses were concentrated in manufacturing. Looking further back, it appears that output has been essentially stationary since about the end of 2009 (index numbers; seasonally adjusted; 2000=100):


However, precisely because growth slowed in the third quarter last year, the annual growth numbers for 3Q 2011 might actually look respectable:


Using the IPI as an explanatory variable, forecast 3Q GDP looks like it will come in at 4.9% in annual log terms. In this case the seasonally adjusted quarterly growth might be a better guide to the economy, as the forecast is for just 0.6% growth in log terms. Not quite the beginnings of another recession, still positive growth, and much better than this time last year (-3.2% seasonally adjusted and annualised).

Technical Notes:

July 2011 Industrial Production report from the Department of Statistics


  1. The mining drop is likely due to the disruption in Bekok. There was an accident there earlier in the year and production has yet to come back online fully.

    If you took that out (or adjusted for it), the IPP would probably be better. I think the mining figure should be adjusted because the disruption is unusual.

  2. Just checked - the Bekok C platform (which caught fire in Dec and is still not back online) mainly outputs gas, but the main dropoff in mining output is in crude. So I'm not sure the Bekok problem fully explains the dropoff in output (Bekok accounts for only about 3.5% of total annual gas production).