Industrial production: once again, the hard data fails to confirm the sof … ofertheluvofgaud
by New Deal Democrat
Industrial production: once again, the hard data fails to confirm the sof … ofertheluvofgaud
This morning’s report on industrial production confirms that the economy remains on autopilot, and that’s a good thing.
Overall production increased again, and the trend of rising production since spring of last year is clear:
When we break it down by manufacturing (blue, left scale), mining, and utilities (red and green, right scale), we get pretty much the same picture:
While it’s true that the manufacturing subindex is below its April peak, I am not terribly concerned. There were very volatile readings in March, April, and May, and if we smooth the readings out via a three month moving average, July is only slightly below June, and both June and July are above every other 3 month average reading.
So the Doomers will have to move on from their “soft data/hard data” argument to something else.
Industrial Production:Manufacturing (NAICS) is still not back to what it was in December 2007. Here is a chart with December 2007=100
https://fred.stlouisfed.org/graph/?g=eNQt
I will take a guess that Industrial Production:Manufacturing is no longer the important stat that it once was. Otherwise I believe that we would have been in recession last year.
Probably because corporations have moved a lot of production overseas.
And
What would the economy look like if the FED raised the FED Funds Rate to what it was in July 2007? (Increasing from 1.15% to 5.25%)
See: https://fred.stlouisfed.org/series/FEDFUNDS
And what would the economy look like if the FED returned its balance sheet to what it was in September 2008? (Decreasing from $4,463 Billion to $919 Billion)
See: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
If those changes were made today, then I believe that the economy would very quickly look a whole lot worse!
The lesson of the 1937-1938 recession was that when the federal government was providing a lot of stimulus, the economy looked a lot better than it really was. And when some of that stimulus was removed, the economic statistics quickly showed that the economy was still in deep trouble.
The FED has already come to the realization that their stimulus can not go on forever. The nightmare for the FED is that the economy will stall while the current stimulus is still in place.
Thus some of the doom and gloom.