Despite the recent stock market rebound, the manufacturing sector is struggling, contracting in 12 of the past 15 months, down 4.5% 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 2% 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.
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.