Tuesday, April 17, 2012

Two Reports: Two Stories

The Lehmann Letter (SM)

Today's two reports remind us that the long view is a long road and that we should expect many bumps on that road. The recovery is in place, but we are not roaring back.

More specifically, industrial production is coming back while housing is going nowhere.

The Federal Reserve reported that capacity utilization had fallen back to 77.8% in March from a revised 78.0% in February:


This report reveals industry's operating rate: How much of its plant and equipment industry requires to produce the current level of output. It measures the strain on facilities: The higher the number, the more robust the pace.

The chart shows us how far we slipped during the recession as well as the substantial ground recovered. We are climbing back to a healthy 80%. March's slight setback follows a healthy run. Let's be patient. Production is growing.

Capacity Utilization
(Click on chart to enlarge)

(Recessions shaded)

The Census Bureau's report on March housing starts is another matter:


They fell to 654,000 from a revised 694,000 in February. That may just be noise in the data, but it also serves to illustrate the predicament in which we find ourselves.

Housing Starts
(Click on chart to enlarge)

(Recessions shaded)

The chart shows just how long we've bumped along at around 600,000 housing starts since the depths of the recession. Now we're up to 700,000 starts. That's a big percentage gain but just a small contribution to where we need to be.

Housing is stuck, and the economy can't get back to full health without a strong housing recovery.

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

© 2012 Michael B. Lehmann

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