Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:

The Latest Indicator Data

According to the Federal Reserve:

Industrial production decreased 0.4 percent in August after increasing 0.9 percent in July. The increase in July is now estimated to be greater than originally reported last month, largely as a result of upward revisions for mining and utilities. Manufacturing output fell 0.5 percent in August primarily because of a large drop in motor vehicles and parts that reversed a substantial portion of its jump in July; production elsewhere in manufacturing was unchanged. The index for mining fell 0.6 percent in August, while the index for utilities rose 0.6 percent. At 107.1 percent of its 2012 average, total industrial production in August was 0.9 percent above its year-earlier level. Capacity utilization for the industrial sector fell 0.4 percentage point in August to 77.6 percent, a rate that is 2.5 percentage points below its long-run (1972–2014) average.

The full report is available here.

Today’s report on Industrial Production for August shows a month-over-month decline of 0.4 percent (0.38 percent to two decimal places), which is below the Investing.com consensus of a 0.2 percent decrease. The indicator is up only 0.91% year-over-year.

In some respects, Industrial Production is the least useful of the Big Four economic indicators. It’s a hodge-podge of underlying index components and subject to major revisions, which undercuts its value as a near-term indicator of economic health. As a long-term indicator, it needs two key adjustments to correlate with economic reality. First, it should be adjusted for inflation using some sort of deflator relevant to production. Second, it should be population-adjusted.

The chart below is another way to look at Industrial Production over the long haul. It uses the Producer Price Index for All Commodities as the deflator and Census Bureau’s mid-month population estimates to adjust for population growth. We’ve indexed the adjusted series so that 2012=100.

Note that the recent rise in this adjusted indicator is largely a result of a deflationary trend in the All Commodities Price Index that began in mid-2014, as we can see in this snapshot.