The economy is like a large ship in at least one way: Neither a ship nor the economy can turn on a dime.
It takes miles of clear blue ocean and time to safely turn a large ship. The same is true for the economy. It takes time for the economy to change direction.
That reality of slow change means 2018 looks like a good year for the U.S. economy. That’s because a key indicator is ending this year in an uptrend.
The Industrial Production Index Through Booms and Busts
Industrial production is rising, but it’s only been rising for about a year. In the past, uptrends in this indicator generally continued for at least five years. Its young trend bodes well for next year, as the trend is likely to continue.
The chart below shows the year-over-year percentage change in the Industrial Production Index (IPI) as the blue line. The S&P 500 index is the black line in the chart. Notice how trends in the two indexes tend to be in the same direction.