Did we get a good IIP number today? No.

It seems that we got a good IIP number today? Here's what the year-on-year growth of IIP Manufacturing says:

Mar 2009	-0.30
Apr 2009	0.39
May 2009	1.84
Jun 2009	7.82
Jul 2009	7.41
Aug 2009	10.21

So it looks like a recovery is gaining traction, with yoy growth going up in each month from March 2009 till August 2009, other than a slight decline in July 2009?



No.



The year-on-year growth is, unfortunately, a highly misleading measure. Here's what we get when we look at the seasonally adjusted levels and the annualised growth of these:

	Seas.Adj.IIP	Ann.Growth
Mar 2009	296.64	1.62
Apr 2009	297.69	4.24
May 2009	299.08	5.59
Jun 2009	319.78	80.32
Jul 2009	320.81	3.84
Aug 2009	322.14	4.98

This shows a very different picture. It shows one big month -- June 2009 -- where seasonally adjusted IIP jumped from 299.09 to 319.78. This was an annualised growth rate of 80.32%. This was the month in which the recovery kicked in, where we jumped back from the low state to a better state.



After that, growth has dropped back to anaemic levels, with annualised growth of 3.84% in July and 4.98% in August. So today's data release was actually not so hot - it was just 4.98% growth (annualised) of seasonally adjusted IIP manufacturing.



Each value of the year-on-year growth rate is the moving average of the latest 12 values of the month-on-month growth. So this one big value of 80.32% is going to elevate each reading of yoy growth up, all the way until we calculate the yoy growth from May 2009 till May 2010. After that, we'll get to the yoy growth from June 2009 till June 2010 and this jump will go away.



You only get the true picture by looking at point-on-point changes of seasonally adjusted data.