Economy and Confidence
61warm
Median position across economies | Data for Aug 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
Industrial production in the US, China, Japan, Germany, South Korea and the UK, compared with the same month a year earlier. The headline reading is the median of their positions.
Manufacturing is the part of the economy most sensitive to the business cycle, and it directly drives demand for raw materials.
Industrial production compared with the same month a year earlier.
Where it stands now
coldcoolneutralwarmhotHatched = earlier periods that were also warm
Short sample: positions start only in 2011 (less than 30 years), so conclusions should be more cautious.
| Economies | Percentile | Level | Data month |
|---|---|---|---|
| South Korea | 78 | warm | Jun 2026 |
| Japan | 74 | warm | Jun 2026 |
| US | 63 | warm | Sep 2026 |
| Germany | 62 | warm | Jun 2026 |
| UK | 56 | neutral | Jun 2026 |
| China | 51 | neutral | Jul 2026 |
When it was here before
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every warm month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
Bars: median cumulative changeEarlier months with Industrial output warm, excluding the current period (17)All months (178)
Median of the deepest drop below the starting month within the next 5 years: −0.5% for months with Industrial output warm; −1.3% for all months.
The warm months come from a small number of market episodes (4), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
| Median position | Back to neutral (40–60) | Still warm or more extreme | |
|---|---|---|---|
| 1 yr later | 44neutral | 47% | 18% |
| 3 yr later | 43neutral | 35% | 29% |
| 5 yr later | 44neutral | 44% | 12% |
Has hot or cold lined up with later returns?
2011–2021: average yearly change in US stocks over the next 5 years
In this period, the hotter the month, the lower the average over the next 5 years. The months overlap, so there are really only a few market episodes. This is a tendency, not a rule, and not a forecast.
What it is linked to
Leading indextoIndustrial outputCommon explanation: Knock-on · same direction
Orders and confidence move first, and production adjusts after
This issue: Leading index at 42 (neutral), Industrial output at 61 (warm) — at least one is in the neutral range (40–60), so we make no call this issue.
Supported by the dataAgreement +0.66 · in step in 10 of 10 5-year periods
Philly FedtoIndustrial outputCommon explanation: Knock-on · same direction
The new orders and shipments that manufacturers report lead actual production
This issue: Philly Fed at 75 (warm), Industrial output at 61 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.45 · in step in 10 of 10 5-year periods
Industrial outputtoCopperCommon explanation: Knock-on · same direction
More production uses more metal
This issue: Industrial output at 61 (warm), Copper at 91 (hot) — both above normal, in line with the common explanation.
Weak or inconsistentAgreement +0.31 · in step in 9 of 10 5-year periods
Data and sources