Today the Federal Reserve reported solid growth in its October index of industrial production:
http://www.federalreserve.gov/releases/g17/current/
Capacity utilization measures current production as a percentage of maximum output. You can see from the chart that capacity utilization dipped below 70% in the depths of recession. That was the worst performance since World War II. More than 30% of America's industrial capacity went unused.
Capacity Utilization
(Click on chart to enlarge)
(Recessions shaded)
Capacity utilization rose to 77.8% in October. That signals continued expansion after a sharp bounce-back followed by a spell of stagnation in the summer. It would be nice to see the upward trend resume.
Inventory restocking generated the strong post-recession bounce. Now the core question is: Will aggregate demand grow quickly enough to send capacity utilization through 80% anytime soon. That depends to a large extent on household demand for new residential construction and motor vehicles.
At least there is no sign of a double dip.
(To be fully informed visit http://www.beyourowneconomist.com/)
© 2011 Michael B. Lehmann
No comments:
Post a Comment