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Industrial Production
Industrial Production
Industrial Production (IP) is another measure of the economy that you can see and feel, because it is a measure of what we produce as an economy. It measures the output of tangible goods - a car is made, a gallon of oil is produced - showing changes over time.

Industrial Production may drop when circumstances get in the way of production. For example, extended car plant shutdowns resulted in IP plunging 1.8% in January. Car-related products were down more than a fifth that month alone.

In fact, the Big Three's struggle has led to plummeting production rates (not to mention mass layoffs). The U.S. produced 40% fewer automotive products in the last year, and 35% fewer in the fourth quarter of 2008 than the third quarter.

The last time production dipped dramatically was during the recession of the early 1990s. In the first quarter of 1991, automakers cut back production 7.5%, to levels of a decade earlier, in an attempt to even out inventories with sales. This time it's worse. Overall, the fourth quarter of 2008 saw a decline of 12.1%, nearly three times as big a drop as in the second quarter, and the worst of any point in the last three decades.

In brighter times, like the last few months of 1997 when most industry groups were growing, production is high. The fourth quarter of 1997 saw the strongest increase in output in recent history: a quarterly increase of 10.7%.

Pretty obviously, if a 12.1% decline in IP is equal to 0 and a 10.7% increase in IP is equal to 10, we're now at the very bottom of the spectrum.

Industrial Production: 0

NEXT: Home Prices

Last updated October 23 2009: 4:39 PM ET
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