Industrial Production
The drop from 83.1% to 69.2% of manufacturers viewing their business outlook as somewhat or very positive is a significant one. Using regression analysis, we are able to predict industrial production two quarters from now—in the first quarter of 2013—in the manufacturing sector.
While year-over-year growth in production should be 4.1% higher, it also suggests that manufacturers will produce 1.2% less at the beginning of the year than they do now (Figure 2). This might be consistent with a fiscal abyss scenario, or it is simply the statistical result of the overly pessimistic responses. Time will tell. Nonetheless, this model has a fairly solid track record, explaining roughly 90% of the variation since 1997.
Figure 2: Predicted Industrial Production
Note: Industrial production is predicted two quarters in advance by regressing NAM/IndustryWeekSurvey of Manufacturers data as one of the independent variables, with data stretching back to Q4:1997. Other explanatory variables include current values for housing permits, the interest rate spread, personal consumption and the S&P 500.
