Updates on some of the series we regularly follow, and they’re not good.
On Thursday the Federal Reserve Board announced that its index of industrial production fell by 2.8% in the month of September (yes, as in 33.6% at an annual rate). That’s the biggest monthly decline in the index since January 1975. To put it in perspective, UCLA Professor Ed Leamer suggested last August that a 6-month decline of more than 3% should be characterized as a recession. That had been the
one holdout among Leamer’s four indicators in suggesting that the economic situation was still not so bad. But according to Leamer’s criterion, the September drop in industrial production almost counts as a recession all by itself.
The good news is that the Fed attributed 2.25 percentage points of that 2.8% decline in September to the temporary disruption caused by hurricanes. On the other hand, another way to summarize the trend in industrial production is to become alarmed when there is a cumulative drop of more than 1% over a 12-month period. The August industrial production figure had already put us across that threshold, even if we completely ignore the September report.
On Friday we learned that the University of Michigan/Reuters index of consumer sentiment fell by 12.8. That’s the biggest drop ever recorded since the index began in 1978, and is enough to wipe out the bounce up in consumer sentiment provided by falling gas prices since this summer.
And, to complete a threesome of updates, the TED spread has remained above 350 basis points for most of the month, though it eased slightly during the last week.