The Big Four Recession Indicators: Industrial Production

Why It Matters

Stronger‑than‑expected industrial production suggests short‑term economic resilience, yet its proximity to historic recession thresholds signals caution for investors and policymakers.

Key Takeaways

• Industrial production rose 0.7% in January, beating forecasts.
• Year‑over‑year growth reached 2.3%, strongest since 2022.
• Utilities index up 2.1%; mining slipped 0.2% in Jan.
• Manufacturing grew 0.6% month‑over‑month, 2.4% YoY.
• Current level matches recession‑onset levels in 10 of 18 downturns.

Pulse Analysis

Industrial production remains a cornerstone of the NBER’s recession‑identification toolkit, joining real personal income, retail sales, and nonfarm employment. Because it captures real output across utilities, mining, and manufacturing, analysts treat it as a real‑time barometer of economic momentum. Historically, sharp declines in the index have preceded the official start of recessions, making its monthly readings closely watched by policymakers and market participants alike.

January’s 0.7% rise exceeded expectations and lifted the year‑over‑year growth to 2.3%, the strongest pace in several years. The sectoral split reveals a robust utilities rebound (+2.1%) that offset a modest dip in mining (‑0.2%) while manufacturing maintained steady gains (+0.6%). These nuances matter: utilities often reflect underlying demand stability, whereas mining’s slight contraction can hint at commodity price pressures. Manufacturing’s consistent expansion supports the view that core production capacity remains intact, even as broader demand signals wobble.

Nevertheless, the index’s current position mirrors the onset levels of 10 of the 18 recessions recorded since 1919, a historical pattern that tempers optimism. Investors should monitor whether this resilience can sustain amid tightening monetary policy and global supply‑chain strains. For policymakers, the data underscores the need for a balanced approach—supporting sectors showing strength while preparing contingency measures for those edging toward contraction. In sum, industrial production’s mixed signals provide both a glimpse of short‑term vigor and a cautionary reminder of its recession‑predictive legacy.

The Big Four Recession Indicators: Industrial Production

By Jennifer Nash, 2/18/26

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which it bases its decisions. This [committee statement] is about as close as it gets to identifying its method.

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

• [Real Personal Income (excluding Transfer Receipts)]

• [Real Retail Sales]

• Industrial Production

• [Nonfarm Employment]

The Latest Indicator Data: Industrial Production

Industrial production rose 0.7 % in January after an additional 0.2 % increase in December. This was higher than the expected 0.4 % reading and marks a 2.3 % growth compared to one year ago.

Here is a breakdown of the three major industry groups:

• The index for utilities was up 2.1 % in January and up 1.1 % year‑over‑year.

• The index for mining was down –0.2 % in January and up 2.5 % year‑over‑year.

• Manufacturing output was up 0.6 % in January and up 2.4 % year‑over‑year.

The chart below shows the year‑over‑year percentage change in industrial production since the series inception in 1919. The current level is at or lower than at the onset of 10 of 18 recessions over this time frame of nearly a century.