Economy Shows Signs of Life
Kurt Brouwer August 15th, 2008
This Bloomberg piece [emphasis added] suggests that the economy is perking up a bit:
U.S. Economy: Consumer Sentiment, New York Manufacturing Gain (Bloomberg, August 15, 2008, Timothy R. Homan and Courtney Schlisserman)
Confidence among American consumers gained in August and manufacturing in New York grew the most since January as a slide in gasoline, oil, metals and grain prices eased cost pressures on households and companies.
The Reuters/University of Michigan preliminary index of consumer sentiment rose to 61.7, from 61.2 in July. The Federal Reserve Bank of New York’s general economic index climbed to 2.8, from minus 4.9 a month earlier. A separate Fed report showed industrial production increased in July, boosted by the end of a strike at an auto-parts supplier.
…”We’re a little less pessimistic than we were a month ago,” Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, said in a Bloomberg Radio interview. “But we still think consumer spending in real terms could be negative in the second half.”
…The Reuters/Jefferies CRB Index of 19 commodities has dropped 17 percent since the start of last month, a period when crude oil dropped 19 percent.
…Factories in New York were more optimistic about their prospects, according to the state’s Fed Bank report. The index measuring the outlook for six months from now jumped 34.6, the highest level this year, from 15.6 in July. Readings of zero are the dividing line between growth and contraction.
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Actually, the industrial production numbers, coupled with the Empire State reading, were quite good. Over the last six months, industrial production has essentially been unchanged (-0.07% since the beginning of the year). Given that annual contractions during a recession hit bottom in the 3%-7% level, and currently industrial production has fallen just -0.14% since last year, the economy seems to be muddling along quite nicely. The industrial production statistic is one that the NBER uses in dating a recession - surely, it is not completely (or even close to completely) clear that the economy is contracting when industrial production, along with GDP, personal income, and retail sales, are posting positive but sometimes negligible monthly gains.
I agree. The statistics on production look pretty decent considering everything we’ve been through. Assuming exports continue their strength and inventories rebound to a normal level in Q3 and Q4, then we could have some surprising GDP growth.