Wednesday, September 16, 2009

Industrial production stuck in last century

While industrial production has turned up, and by NBER standards the recession may be over (they’ll decide well after the fact), industrial production will probably remain depressed for several years.  Given the debt drag on the economy, the collapse of consumption and investment, industrial production isn’t likely to achieve 110+ levels for many years if my forecast of another round of deflationary collapse in about four years is correct.


Looking at percent changes from a year earlier for industrial production, real consumption spending, and real private fixed investment spending it is tempting to look for an accelerator-type pickup.  Real consumption spending has been far more stable than either of the other series.  But real consumption spending is taking a beating from increased saving, slow-to-no wage growth, and yet-increasing unemployment, and real estate investment spending on construction isn’t coming back soon, so any accelerator effect (derived demand for investment spending) is likely to be muted.


Data to August 2009 except for investment which is quarterly to 2009Q2.

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