IP and Capacity Utilization

The Fed released the figures for May this morning. Both industrial production and capacity utilization showed healthy increases. I have been particularly impressed by the increase in capacity utilization in manufacturing over the past few months. It has now clawed its way back to where it was during George W. Bush’s 3rd month in office, April 2001.

By the way, pursuant to the discussion about yesterday’s CPI data, this recent rise in capacity utilization is why I am no longer worried about possible deflation in the US. I think we’ll continue to see inflation rising as capacity utilization grows further over the next few months. Not that this will continue indefinitely; I still fear for the sustainability of this recovery. But time will tell.