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Thursday, October 16, 2008

Just In Case the Retail Sales Numbers Didn't Convince You

The Federal Reserve released the industrial production numbers for September earlier today. Compared with August, industrial production is down 2.8%. This is the largest monthly decline in industrial production since December 1974. So far this year, industrial production has declined, compared with the previous month, in February, March, April, May, August, and September. While the earlier declines were modest, the combined August and September declines total 3.83%. The level of industrial production in September is 4.5% below the September 2007 level. This is the largest annual decline since December 2001, which came at the end of a string of 13 monthly declines.

A commenter at Paul Krugman's blog asks whether the September decline can be attributed to Hurricane Ike. I would judge that it cannot. In 2005, Katrina made landfall on August 23, and industrial production fell by 1.8% in September (compared with August; IP rose in August, by 0.17%, compared with July, not out of line with previous months in the year), and then rose by 1.17% in October (compared with September). This year, IP fell by 1.14% in August. And Ike did not make landfall until September 13, so only the second half of the month could have been affected. And--Ike was not as severe a hurricane as Katrina.

In any event--more evidence, if we needed it, that we are in a recession.


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