Earlier this week the stock markets plunged and we were all flooded with stories of the billions lost in just one day. We all immediately flashed back to the 2009 recession and how business virtually stopped. There are a lot of indicators that a crash was coming including stock market highs, record breaking M&A activity and increasing expansion of government subsidies. Will the market crash affect industrial production?
Most importantly, we’ve been here before and we’ve rebounded nicely. Below is the S&P 500 index for the past 12 months from Marketwatch.com. In mid-October of 2014, the market dropped to almost the same level as this week before climbing again. Manufacturing remained steady throughout the down turn and actually increased since then. I have attached a graph from the same time period from the Fed’s Industrial Production Index that shows strong growth after the October 2014 the market dip.
While this is hopeful, we should expect some amount of slowdown in manufacturing if the market uncertainty remains. As you can see below, overall there is a strong correlation that industrial production does lag a market downturn. The silver lining might be that industrial production softens, but does not drop compared to the market.
from ETM Manufacturing http://etmmfg.com/3533
from American Quality Management http://aqmauditing2014.tumblr.com/post/127736400480
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