Industrial Production Jumps 0.5 Pct

The full Federal Reserve report is at Industrial Production and Capacity Utilization - July 2003

Fyi...

boosted by a big gain in utilities output

Oh, so now a heat wave is offered as evidence that the economy is booming?

;-)

The Recession's Growing Credibility Gap
by JohnHuang2
August 12, 2003

For Democrats, especially '04 wannabes, a once promising recession appears increasingly mired in quagmire. Deepening quagmire. By almost every key measure, from rising personal income to falling weekly initial jobless claims, the recession is struggling badly.

Democrat campaign strategists had hoped the recession would be a 1-termer (at least) -- lasting all 4 years of Bush's tenure, then resigning from public service in January, 2005, as a new Democrat president gets sworn in. This is the rosey scenario, or cakewalk theory. The hope was that the recession would unseat Bush as it did his father back in '92. Hardline Democrats -- the Howard Dean wing of the party -- see this recession as recession-lite, and there is no way it can beat Bush by trying to be recession-lite, they argue. Dean proposes disarming the economy -- repeal of the Bush tax cuts across-the-board, turning recession-lite into real recession. Less hardline factions, led by Sen. Joe Lieberman of Connecticut, argue that, to increase the recession's appeal among more moderate swing voters and peel them away from Bush, recession-lite is the only way to go. He notes the recession that undid Bush's father was, for all intents and purposes, recession-lite, too.

Although the recession had remained remarkably popular with Democrats since taking office in January, 2001, there are growing signs of trouble. Among Democrats, the recession had once commanded towering 100% approval ratings in its handling of the economy, but no more. Recent polls show rising doubts on the recession's credibility as an almost daily barrage of bullish news on the economy, from Wall Street to Main Street, takes its toll. Everyday, it seems, the recession gets pummeled by gloomy news of an accelerating economy. Some Democrats wonder if the recession had exaggerated evidence of its existence, or of the imminent threat it posed on the Bush administration. The slide in confidence in the recession and rising disapproval of its performance among Democrats likely will only grow worse, if recent economic signs are any harbinger.

Among the slew of worrisome signals fueling growing doubts over the recession's credibility: The latest government report on second quarter GDP (Gross Domestic Product) shows a better-than-expected 2.4% annual growth rate, despite the war in Iraq and terror jitters, with analysts expecting 4%-5% growth for the second half; not only is consumer spending sizzling, business investment -- whose anemic performance had been a big drag on the economy since the dot-com collapse -- is gaining momentum as well; the surge in business spending is, like the stock market rally, a leading indicator -- it presages future hiring, pushing the key unemployment rate down; the housing boom is still booming, despite the recent jump in interest rates (prompted by an accelerating economy); the service sector soared in July, the Institute for Supply Management's key index rocketing to 65.1 percent, up from an already bullish 60.6 in June. The sizzling July figure was the sizzle-ing-est since the survey began exactly 6 years ago, and presages 6% GDP growth for the 3rd quarter; factory orders in June jumped 1.7% -- better than expected, propelled by soaring durable goods orders, the index's 3rd increase these past 4 months; productivity jumped a 5.7 percent annualized rate for the 2nd quarter, while initial jobless claims dropped below the benchmark 400k/week for the first time in 6 months for the week ending August 2.

Amid the recession's increasingly sluggish performance, the growing frustration has driven Democrats to ask, 'who lost the recession?' Or was the recession distracted by coverage of Kobe Bryant, Scott Peterson and the California recall election? Did the recession mislead us into thinking this would all be a cakewalk? Did the recession willfully exaggerate its capabilities? If the tax cuts undermined the recession's momentum, why not repeal 'em all?!

These are just some of the questions Democrats are increasingly asking themselves these days.

Anyway, that's...

My two cents...
"JohnHuang2"
Copyright Enrique N. ©2003

Among the slew of worrisome signals fueling growing doubts over the recession's credibility: The latest government report on second quarter GDP (Gross Domestic Product) shows a better-than-expected 2.4% annual growth rate, despite the war in Iraq and terror jitters

You stated it exactly backwards to make it fit your obvious political bias. GDP rose because of massive increases in big government spending for the war in Iraq and exaggerated terror jitters. Nothing quite like a war to give the illusion of economic recovery. The bad news is that someone, as in taxpayers, will eventually have to pay a very high price later to keep corrupted and badly flawed political leaders in office now.

Richard W.

"a third straight monthly rise in factory activity"

Willie Green and the Democrats are going to be deeply saddened....

Things are picking up faster than even the most optimistic expected.

Second quarter GDP growth is likely to revised from 2.4 percent upward to between 2.9 to 3.1 percent.

Third quarter GDP estimates are all above 4 percent, and I've seen much speculation that it could be high as 5 to 6 percent. Fourth quarter likely will be in that range or even higher.

The economy starts creating jobs around 3.5 GDP growth.

It looks as though the economy may grow at 5 to 6 percent between now and November 2004. The effect would be a Bush landslide with long coat-tails.

It looks as though the economy may grow at 5 to 6 percent between now and November 2004

Only if GW decides that the economy is so bad that he decides that Europe, Canada and Mexico are full of "evil-doers" and invades them all. The military is hiring new targets right now.

Richard W.

You guys really need some perspective.

The industrial production increase (.5%) is the rightmost hash-mark on the inset graph below. Note that it isn't really visible.

60% of the GDP growth was due to government & defense spending. While defense is necessary, it contributes nothing to productive growth - it's a pure expense, likewise with government spending, except for things like highways. As 'Republicans', you ought to care about government spending and not be relying on it. When you rely on government spending for your growth you are no different than liberals.

If you spent any time studying the 'productivity' numbers - most of which come from our service sector - you'd know that they assume an average 35 hour work week (I guess that's a full week for a government employee). Who do you know works just 35 hours? How many people do you know are working 50 hours, or two jobs?

The bulk of the ISM-non manufacturing improvement was in finance, real-estate, and residential construction - all driven by the mortgage/housing bubble which is deflating as interest rates are now rising.

Yes durable goods increased - mostly auto production - again driven by 0-interest discounts and cash-out re-fi's. Likewise retail sales increased, but that's mostly foreign manufactured clothing, electronics, furniture, etc - all of which increases the trade deficit at the expense of US industry.

On average, the S&P 500 companies as reported in their GAAP 10K's and 10Q's filed with the SEC and including the liabilities for pensions, stock options, 'one time charges', etc., continue to lose money and will continue to lay off employees. The unemployment/underemployment rate is now about 10.5%. Why do you think so many workers are scared of losing their jobs and are working 50-60 hours a week to keep them (hence the productivity miracle)?

There have been some core improvements. We exported more recently due to the falling dollar which drove manufacturing up slightly. There are other smaller improvements. But the debt taken on by the government, state governments, the consumer, and corporations will overwhelm these benefits as most of the cash flow now goes to service old consumption debt rather than contribute to investing in new growth.

When you spin headlines to suit a political agenda at the cost of misinforming the electorate, how are you any different than the liberals, the NY Times, the Democrats, etc.? If the end justfies the means, what distinguishes the Republican ethic from the Democrat? How does one tell when a Republican is explaining versus spinning?

Would you take your grandmothers life savings and invest it on your understanding of the economy?

Here's Reuters tabular report:

U.S. July industrial output rose 0.5 pct
Friday August 15, 11:07 am ET

   WASHINGTON, Aug 15 (Reuters) - Federal Reserve Board report
of U.S. industrial production and capacity utilization,
seasonally adjusted. Total Industrial:
.                          July   June    May  July03/02
 Production, Pct Change     0.5   UNCH    0.1     -1.4
 Previous Estimates                0.1    0.1
 Production Index-X       110.0  109.5  109.5
.                          July   June    May    July'02
 Pct of Capacity Use       74.5   74.2   74.3     76.4
 Previous Estimates               74.3   74.3
 X--1997 equals 100
 Pct change:               July   June    May  July03/02
  Final Products             0.5    0.2   UNCH     -0.8
  Consumer Goods            0.5    0.1   -0.2
  Business Equipment        0.4    0.4    0.4
  Nonindustrial Supplies    0.4   -0.4    0.6
  Construc.Supplies         0.2   UNCH    0.6
 Materials                  0.4   -0.1   -0.2     -1.9
 Manufacturing Industry     0.2    0.3    0.2     -1.4
  Durable Goods             0.8    0.4    0.3
  Motor Vehicles/Parts      2.9    1.7   -1.1
  Non-Durable Goods        -0.4   UNCH    0.1
  Mining Industry          -0.4    1.2   -0.4     -1.0
  Utilities Industry        3.9   -3.3   -0.9     -1.9
 SPECIAL AGGREGATES:
 Pct change:            July  June   May  July03/02
 High-tech output           0.8   0.7   1.2      9.3
 Industrial output
 ex high-tech            0.5  -0.1  UNCH     -2.0
 Industrial output
 ex cars/parts           0.3  -0.1   0.1     -1.4
 Motor Vehicle Assemblies (million unit annual rates):
.                       July   June    May
.                      12.15  11.90  11.50
 Percent of Capacity: Manufacturing, Mining, Utilities:
 (Seasonally Adj.)      July   June    May   July'02
  Manufacturing            72.8   72.7   72.6    74.3
Durable Goods           69.0   68.5   68.3
  Motor Vehicles/Parts     79.3   77.4   76.3
  Non-Durable Goods        76.7   77.0   77.0
  Mining                   84.6   84.9   83.9    85.7
  Utilities                83.2   80.4   83.4    89.6
 FORECAST:
 Reuters survey of economists forecast:
 U.S. July industrial production +0.1 pct
 U.S. July capacity use rate 74.3 pct
 HISTORICAL COMPARISONS/NOTES:
 U.S. JULY INDUSTRIAL OUTPUT RISE LARGEST SINCE JAN'03 (+0.7
PCT)
 Data for durable, nondurable and motor vehicles/parts use
the Commerce Department's definition of manufacturing under the
North American Industry Classification System (NAICS), which is
narrower than the Federal Reserve's definition.
 High technology industries include computers and office
equipment, communications equipment, semiconductors and related
electronic components.

Good job.

Sorry to pile on, but I have to note how quickly we forget the not-so-distant past. In the first quarter of 2002, GDP grew at a rate of 5.0%, followed by similarly impressive 4.0% growth in the third quarter of 2002. We see how much of an impact that made toward the overall vigor of the economy.

Either the structural impediments to enduring economic growth will be resolved - particularly via liquidation of the malinvestments of the Nineties which have only been aggravated by Fed policies of the past several years - or the systemic fragility of the U.S. economy will persist. The first significant shock (whether geopolitical or macroeconomic) would instantly turn this current economy downward even to the point of outright recession.

The economy has grown less in the first two quarters of 2003 than it did in just the first or third quarter of 2002. This gives the appearance of rebound for two simple reasons (1) we're in a cyclical bullish period where positive indicators are overemphasized and negative indicators underemphasized; (2) the economy had been depressed below its various trendlines due to war in Iraq, so the routine postwar rebound appears promising by comparison.

The economy will need expand by an average of 4.0% during the next two quarters just to match the economic growth of a mediocre 2002. With the bond markets in a fit and interest rates on the way up, I wouldn't hold my breath..

"Would you take your grandmothers life savings and invest it on your understanding of the economy?"

Better than that, I take my daughter's future and my life savings and invest it on my understanding of the economy.

BTW - I'm rich on that basis. How are you doing?

boosted by a big gain in utilities output

I guess industrial production in August is going to fall. I guess 20% of the country was without power for 1/2 a day on average. That's 1/62 of the month, and 20% of that is about 0.3% alone for the effects of utility output for the blackout.

BTW - I'm rich on that basis. How are you doing?

Safe and not nearly as arrogant.

Let's compare arsenals and portfolios some time.