Despite the recent stock market rebound, the manufacturing sector is struggling, contracting in 12 of the past 15 months, down 2% YoY, with the worst growth rate since 2009. While not indicative of an economic recession, falling industrial production historically has been consistent with a profits recession which has been ongoing for four quarters. The report also shows that consumer spending fell by 0.4% YTD to $50.1 billion, while business fixed investment declined by 0.5% and residential fixed investment dropped 0.4%.
Despite the recent stock market rebound, the manufacturing sector is struggling, contracting in 12 of the past 15 months, down 2% YoY, with the worst growth rate since 2009. While not indicative of an economic recession, falling industrial production historically has been consistent with a profits recession which has been ongoing for four quarters. According to Bloomberg data, non-financial profits fall at an average rate of 4.5% YoY when industrial production declines YoY. Investors should be aware that for the stock rally to continue, there needs to be an upturn in earnings growth.