Monday, June 18, 2012

December IIP: Robust but Look at Rolling 12 Month Data

The IIP (Index of Industrial Production) for December ’09 came out relatively robust, showing 16.8% growth from its 11.7% value in November '09. While this clearly shows industrial activity has picked up, one should not read too much into it, since all this is partly a correction of what happened a year ago. At such times, it is best to look at trend data, rather than a single point data.

(Click to enlarge)

IIP by this measure has reached 6%, which is par for the course. IIP had crossed 6% in June 2003 and stayed above 6% until September ’08, after which the global recession struck. This was a 64 month period, or more than 5 years. In this period, over 10 readings (months), IIP was below 6%, but the 12 month averaging smoothed out such isolated numbers.

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