CAPACITY UTILIZATION INDICATIVE OF WEAK ECONOMY
This morning’s reading on capacity utilization and industrial production shows that the recovery in the USA remains very weak. Â The Fed reports:
“Industrial production was unchanged in April after having increased 0.7 percent in March. Output in February is now estimated to have declined 0.3 percent; previously it was reported to have edged up 0.1 percent. In April, manufacturing production fell 0.4 percent after rising for nine consecutive months. Total motor vehicle assemblies dropped from an annual rate of 9.0 million units in March to 7.9 million units in April, mainly because of parts shortages that resulted from the earthquake in Japan. Excluding motor vehicles and parts, factory production rose 0.2 percent in April. The output of mines advanced 0.8 percent, while the output of utilities increased 1.7 percent. At 93.1 percent of its 2007 average, total industrial production was 5.0 percent above its year-earlier level. The rate of capacity utilization for total industry edged down 0.1 percentage point to 76.9 percent, a rate 3.5 percentage points below its average from 1972 to 2010.”
This is one of the better broad indications of economic growth. Â The lumpy growth in recent months is consistent with much of the weak data we’ve been seeing lately. Â Historically, the 80% level has signaled a healthy and robust economy. Â And while a quick glance at the historical data might show that we’re not far from that level, we’re actually closer to past recession lows than the 80% range.
This isn’t your average recovery….It’s built upon a much weaker foundation where the balance sheet recession lurks. Â If these cries for austerity take hold in the coming years and we convince ourselves that we are Greece we are going to be having a conversation almost as bad – the one comparing us to Japan.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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7 Comments
Government spending must be radically changed to stimulate investment, innovation and productivity–not fear, retrenchment, inefficiency and inactivity. The tax structure must support this.
We need a brilliant leader who understands this. Where is he or she?
MMT needs help with marketing. Cullen, could you blog about that?
I try my best to get the word out….It’s hard to convince people however….
But Cullen, would you not agree the $ trillion stimulus unfocused and wasteful as it was makes another one more unlikely?
People don’t trust government to generate “a brilliant leader who understands this”. Brilliance is unelectable!
Brilliance is easily electable, it’s who the brillance is intending to serve that may make someone unelectable.
True! Brilliance in the context of the Cirrus post.
If the vast majority, for example, don’t even know who Geithner is, how would they know someone is ‘brilliant’?
Do what we did in Australia during the GFC – Give several rounds of $1000 cheques to everyone to go buy LCD tv’s, build a whole bunch of useless million dollar school infrastructure, Give people free housing insulation (which resulted in a lot of houses burning down), and a whole bunch of other useless crap nobody needed..
Straight through the GFC without unemployment so much as reaching 6%… Theres some MMT proof for yee