Friday, July 15, 2011

Production Stalls

The Lehmann Letter SM

Go to to view this morning's Federal Reserve report on June industrial production and capacity utilization.

At year's mid-point industrial production is barely higher than it was at the start of the year. Capacity utilization, which measures current output as a percentage of the maximum, is actually lower.

Capacity Utilization

(Click on chart to enlarge)

(Recessions shaded)

The chart reveals a good bounce since recession's bottom. But capacity utilization has leveled off at about 77% since the beginning of the year. This seems to be further evidence that the economy's expansion has stalled.

The big question: When will these events begin to affect earnings and the stock market? So far both have been riding high on improved profit margins. But that can't last indefinitely. Production must grow for profits and the stock market to maintain their upward trend.

(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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