Understanding how industrial production impacts the national economy
U.S. Industrial Trends Tracked in Economic Monitor
by Kristen Stephenson
In April, GPEC launched the Economic Monitor, a comprehensive web tool designed to provide timely, actionable insights into the state of the economy. Through an exploration of key economic indicators, the Economic Monitor offers a concise picture of health at both national and regional levels.
Each month I’m diving into one of the indicators from the Monitor to share in greater detail what the metric measures are, why each matter to the economy and what the current numbers are telling us. This time we’re examining the Industrial Production Index.
What does the Industrial Production Index measure?
The Industrial Production Index (IP) tracks the real output of industrial establishments in the United States. Output measures the number of goods produced. The index is benchmarked with the average of 2017 monthly values equaling 100. A value above 100 indicates increased production output compared to the baseline. This data is released in conjunction with Capacity Utilization indices, which measure the sustainable maximum output.
Why does Industrial Production matter?
This indicator measures the growth rate of the manufacturing, mining, and electric and gas utility industry groups, which are the base jobs in an economy. Base jobs are critical as they are not dependent on population growth. Together with the construction industry, the industrial sector represents the majority of the change in national output. Tracking this index allows us to have insight into the current business cycle and better gauge the likelihood of a recession.
What do the current numbers say?
The Industrial Production Index registered at 103.01 through May 2023, meaning industrial production output is about 3% higher than in 2017. This is down slightly from the previous month’s reading of 103.17 but up from the same time last year, when the index measured 102.78. The IP index dropped substantially in the immediate aftermath of the COVID induced recession, dropping from 101.63 in February 2020 to 84.60 in April 2020 and took approximately eighteen months to return to previous levels. Since then, it has been stable with mild fluctuations.
Track trends in the Economic Monitor
To see industrial trends mapped alongside 14 other key indicators of health, visit the Economic Monitor. We hope you find the Monitor a valuable tool in understanding the ever-changing economic landscape.