What's Up With the Manufacturing Data?

In coming up with dates for U.S. recessions, the NBER says that it gives the most weight to four economic indicators: employment, personal income, industrial production, and manufacturing and trade sales.

Below is a chart plotting year-over-year changes in the first two. It's much more visible in the employment growth line (blue), but both series seem to have peaked and have been trending downwards:

Now take a look at the plots for industrial production and new orders for nondefense capital goods excluding civilian aircraft -- what's also known as core durable goods -- that was released today. (I plotted the new orders series in place of manufacturing and trade sales since the two follow each other pretty closely and the St. Louis Fed's graphing tool doesn't have data for the latter.)

Industrial production has been pretty stable while core durables troughed in 2006 and are now heading north, not exactly a screaming recession signal. So, which way is the economy headed?

Last week, the Conference Board reported that after five months of negative readings, its index of leading indicators rose 0.1 percent in March. And the recession contract at Intrade (which pays off if the GDP growth is negative for two straight quarters) has dipped over the past couple of weeks:

Of course, there is still the big question of what will happen to an economy that is so heavily dependent on consumer spending as the U.S. is. The housing market still hasn't bottomed, Starbuck's said yesterday that there was a "sharp weakening" in consumer demand, and UPS reported a "dramatic" decline in demand. But taken together, the data may be suggesting that we're close to, if not past, the bottom of the current cycle. (On the other hand, manufacturing might be ready to fall off a cliff.)

For an alternate take on the data, read the WSJ's Kelly Evans here.

UPDATE
I should've pointed out that the NBER looks at actual levels not year-over-year changes as I've plotted above. The benefit of y-o-y is that it can help pin-point inflection points in the economy.