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Are we headed for another round of downsizing?

Business investments may be on the downswing, according to at least one economic indicator. 

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This chart shows the rate of industrial production for business equipment since 1999. The latest downturn may be hinting at a looming recession, the author argues.

Looking deeper into last Friday’s weak industrial production report, it appears that the “Business Equipment” component is giving a clear sign of weakness as well as substantiating the business investment pullback noted over the weekend by the WSJ.

In fact, looking at the data (click on the chart below for a full-screen dynamic version of the entire history of this data series) it’s easy to see that this series makes fairly sharp tops as the economy transitions into recession making it a useful contraction indicator.

Keep in mind though, while the latest results look like another solid harbinger of looming recession, the data is still fairly preliminary and subject to revision.
Another couple or few months of data will be required to determine if this pullback is simply a slowing of our halfhearted recovery or a more notable slide into a new recessionary decline.

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