October 6, 2025

Hi, everyone. My name is Taylor St. Germain with ITR Economics. Thanks for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence. And today I wanted to discuss leading indicators, specifically the leading indicators that we track as it relates to the US Industrial Economy.

Now, as many of you know, from listening in or following ITR, we’re very focused on the US Industrial Production index. GDP is a perfectly fine measure of the economy, but we spend much of our time focused on the industrial production index because it’s what our clients correlate with. The industrial production index has just a much stronger application to manufacturing, mining, utilities, a lot of the different spaces that our clients play in. And through doing thousands of correlation analyses a year, we find that industrial production is a better leading indicator.

Now, as I’ve mentioned on previous episodes of TrendsTalk, we’re really preparing a lot of our clients for an uptick in overall industrial activity. We are expecting accelerating growth in the industrial production index, which highlights an increase in industrial demand coming our way, especially as we move into 2026. But we’ve had some questions come our way surrounding some of the leading indicators, because despite positive indications from some leading indicators, the leading indicators as of late have been moving sideways. And I wanted to just unpack this a little bit.

So if you dive into our Core section of our ITR Trends Report, then you’ve likely seen a number of these indicators. First, we have our proprietary ITR leading indicator, we have our ITR Retail Sales leading indicator, the Total Industry Capacity Utilization Rate, the Purchasing Managers Index, these are just some of our favorites that we are consistently highlighting in the Trends Report. And what you’ll notice from most all of these indicators is despite being in a general rising trend, really since this time last year, some of the leading indicators are moving sideways. And that’s not a problem, per se, and it’s not all that surprising to us forecasters here at ITR. But it highlights that the rise that we see in the industrial sector characterizing most of 2026 is just going to be a more mild rising trend than what we saw coming out of the pandemic, for example.

So when we see our leading indicators positive but moving sideways, that doesn’t concern us. That doesn’t mean we’re headed for a recession. If we were headed for a recession, those leading indicators would be not only pointing down, but falling below zero. And that’s absolutely not the case. But it is the case that the rise that we have forecasted in 2026 is going to be more mild than what we saw, like I said, coming out of some of the previous downturns over the last few decades.

And you might say, well, Taylor, why is this worth talking about? You’re still talking about growth. Why does mild rise, you know, grab our attention at ITR? And it’s because of the implications this has from a forecasting standpoint. You know, if you look at your historical data and are using that historical data to project forward, you need to know that these leading indicators, again despite saying growth, are saying the rise won’t be as significant as what we might have seen in past cycles. We all want to get our forecast right. Of course, whether that’s for our executive teams, whether that’s for our internal planning and strategy. And it’s very important that we’re not just focused on direction, but we’re focused on what we call amplitude, how high or how low will our business perform in this next cycle. So there’s still a lot of good news. We’re still preparing for growth, but make sure you consider that the growth is going to be more mild than what we might have seen in past cycles, because forecast accuracy is important for all of us, and there are some major implications there.

So from a business standpoint, we should still be preparing for growth in 2026, our macroeconomic outlooks haven’t changed. These leading indicators are just highlighting that that pace of growth will likely be more mild. For those of you that are really trying to understand what this means for your business, that’s where we come in. When I’m not hosting a podcast or traveling the country, I’m finding companies’ leading indicators so that they can better plan for what this growth is going to look like. It’s a lot different if we’re planning for capacity in a mild rising trend than if we were planning for capacity, say coming out of the pandemic. So these are important nuances to understand. We’ve always relied on leading indicators to give us this insight, and that has not changed. So yes, there’s still better news on the horizon, there’s still more growth coming, but we really need to get specific about what growth means as it relates to the type of growth rates we’ll see in our business during this next cycle.

Let us know how we can help you out. That’s our job, that’s where we come in. Thanks so much for joining me on this episode of TrendsTalk. Please remember to like and subscribe to TrendsTalk wherever you listen to your podcasts. I look forward to seeing you all in the next one. Thanks so much, take care for now.