Sunday, May 31, 2015

Output and the Industrial Production Index

At FRED, the notes for INDPRO (the Industrial Production Index) read in part:

The Industrial Production Index (INDPRO) is an economic indicator that measures real output for all facilities located in the United States manufacturing, mining, and electric, and gas utilities (excluding those in U.S. territories).

It's an index of real (inflation-adjusted) industrial output. One might suppose the index runs more or less in proportion to overall output. One could check that by comparing INDPRO to an inflation-adjusted measure of GDP.

Graph #1: Real GDP Relative to the Industrial Production Index
US output grew generally more slowly than industrial production until around 1973, and generally faster than industrial production since that date.

During the post-1973 period of increase, there is a decline from 1992 to 1998. Goldilocks, I think. Industrial production grew faster than GDP in the Clinton years.

Anything else?


The Arthurian said...

Yeah, I got something. GDP has been growing faster than industrial production since the mid-1970s or so -- perhaps because finance has been growing faster since that time.

One would have to look at sectoral components of GDP: financial sector, industrial sector, farm sector I suppose, and what else is there. (Maybe that's in the components of GDI??)

The point being that if GDP has been growing faster than the products of industry, it must be because some other sector (finance, for example) has been growing faster. Increasing imports would account for the decline of industry -- and could also account for a greater need for finance.

The Arthurian said...

Yup, something else.

The "Goldilocks" years -- the latter 1990s, about -- were supposedly driven by a tech boom. That was Alan Greenspan's thought, widely adopted.

Does that explain why the industrial sector grew faster than GDP?

It just doesn't seem to fit.