Tuesday, January 24, 2012

Full Steam Ahead?

The Lehmann Letter (SM)

Some observers are moving from deep gloom to a sunnier prognosis for the economy.

This letter has long believed that expansion will be slow, tenuous and a struggle.

Let’s examine two charts to see where we are.

Purchasing Managers’ Index

(Click on chart to enlarge)

(Recessions shaded)

Capacity Utilization

(Click on chart to enlarge)

(Recessions shaded)

The purchasing managers’ index provides purchasing managers’ view of the industrial scene, and capacity utilization informs us of how heavily industry is using its plant and equipment. You can see that the former is below 55 and the latter is below 80.

The historical record makes clear that these are not robust numbers. Each of these indexes must consistently exceed each of these signposts before industrial expansion deserves the “robust” label.

The expansion is not yet in high gear.

(To be fully informed visit http://www.beyourowneconomist.com/)

© 2012 Michael B. Lehmann

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