Friday, January 14, 2011

Strong Showings

The Lehmann Letter (SM)

This morning's statistical releases included strong gains in industrial production and capacity utilization as well as a big jump in business sales.

You can find the Federal Reserve's capacity-utilization report at:

Just scroll down to the second blue banner titled "Percent of capacity" and look under December 2010. You'll see that it was 76.0 and made a nice jump up from earlier months that seemed stuck in the 75% range.

It may look like much ado about nothing, but if you place 76% on the chart it appears that capacity utilization is climbing out of the ditch. That's good news because capacity-utilization data answers this question: What is the current industrial operating rate expressed as a percentage of the maximum? You can see the recent recession's severity and that any reading below 75% is in the doldrums. Capacity utilization must rise into the 80s before we can say that American industry is once again operating at a healthy rate.

It's true that we have a ways to go before we breathe a sigh of relief. But we're headed in the right direction.

Capacity Utilization

(Click on chart to enlarge.)

Recessions shaded

This morning's other report is available from the Census Bureau at:

Scroll down to Table 1 and compare adjusted sales for October and November. Run your eye to the right and you'll see that, despite the growth in inventories, the inventory/sales ratio dropped sharply. This means that business's restocking of goods on the shelf couldn't keep up with the growth in sales volume. That's a nice problem to have.

These are good, solid and strong reports. They augur well for the New Year.

(The chart was taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2011 Michael B. Lehmann

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