A large portion of industrial production is based on long-term assets. With any period of rapid economic growth and expansion a large segment of manufacturing will experience rapid growth followed by a leveling off of sales and production.
A construction company for example is unlikely to purchase new bulldozers or other heavy equipment every year as these are long term assets with a useful life of thousands of hours. This is true across industry and it must be baked into the cake even with what has been an unexpectedly vigorous growth of our economy.
Exactly right. PMI is a lagging indicator because it only shows a snapshot of “today”. A leading indicator such as Factory Capacity Utilization is a better predictor of economic growth because manufacturing companies do no invest in new plant and equipment or hire more workers when they are sitting on lots of idle capacity.
Manufacturing capacity utilization is nearing 80%, compared to a low of 63% i the Obamanation. With the market and money supply as it is and with the tarrifs increasing demand for US-made goods, there is no indication of a slowdown, and in fact there will be continued growth.
Remember the old expression, “lies, damned lies, and statistics”!