Economic Papers - Study of Expansions of Industrial Production in the United States from 1925 to 2018

The purpose of this paper is to:

  1.   establish reasonable methods for quantifying expansions of industrial production;
  2.   apply these methods for quantifying past expansions of industrial production in the United States of America from 1925 through March, 2018;
  3.   establish reasonable methods for categorizing the magnitude of the expansions; and
  4.   simplify the understanding of this phenomenon.

For the purposes of this paper, an "expansion" of industrial production is defined as a period beginning when the Federal Reserve Index of Industrial Production exceeds the prior peak in the index until the index peaks again. Important criteria in expansions of industrial production are:

  1.   the maximum percentage of increase from the prior peak month to the highest month of the expansion;
  2.   the total number of months of increase until the index reaches the highest month of the expansion; and
  3.   the sum total percentage of increase of all months from the beginning of the expansion until the index peaks.

For example, the 10/1961 to 10/1969 expansion reached a maximum increase of 61.870% in 10/1969. It took a total of 97 months from the beginning of the expansion until 10/1969. The sum total of all combined monthly percentage increases is 3079.283%.

The old adage that "a picture is worth a thousand words" is applied as "Martin's Razor" to simplify the complexity concerning understanding expansions of industrial production. What follows is a graph of the industrial production index in the United States of America prepared by the Board of Governors of the Federal Reserve System (US).

Subsequent are individual graphic presentations of the 14 expansions which occurred from 1925 to 2018, ranked from high to low as determined by the sum total of the monthly percentage of increase.