Hard to See Recovery in These Numbers

Another day of economic data that doesn’t spell raging recovery.

Industrial Production

Capacity utilization increased slightly from 68.1% in June to 68.5% in July. Industrial production was up 0.5% which is the first increase in that number since December 2007. Manufacturing production was up 1% but that was almost entirely due to auto companies ramping up production after their summer shutdown which was exacerbated by the bankruptcies of GM and Chrysler. Taking autos outo fo the equation, manufacturing was up 0.2%.

Overall, the economy still has enormous excess capacity. Their is nothing in these numbers to suggest that new investment will be needed for a prolonged period of time, which is just one more anchor to drag around. (more: here)

CPI

Consumer prices were flat. They rose 0.1% in July. Given the employment picture and the low utilization of productive assets, any inflation scenarios have to be considered fanciful. This gives the government a lot of leeway to continue pumping out money with little fear of igniting the inflation fuse. (more: here)

Consumer Confidence

Consumer confidence is a number that bounces around a lot and I tend to not take too seriously given its propensity to reverse course. Nevertheless, given the expectation for it to rise this when it actually fell from 66.0 in July to 63.2 this month, it probably deserves to be noted.

Linking it to the dismal retail sales report yesterday, reinforces the argument that the consumer isn’t remotely prepared to lead the economy out of the doldrums. They are scared to death, broke or think they might be soon and aren’t at all ready to come out of their cave. (more: here)

The numbers today don’t point to any incipient disaster but they certainly don’t show any strength that we can expect to build upon. We might well get a recovery of sorts in the third quarter simply because the economy won’t continue to shrink indefinitely. The problem is that there don’t appear to be any fundamentals on which to base long-term robust recovery.

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