Friday, October 16, 2009

Crisis Watch: Good News Friday

I have been trying to find some areas of optimism and this is a big one, from MarketWatch:

U.S. Sept. industrial production up 0.7%

WASHINGTON (MarketWatch) -- Led by a rebound in autos, metals, and high-tech, U.S. industrial production increased at an annual rate of 5.2% in the third quarter, the fastest growth in four years and the first quarterly increase since the recession began in late 2007, the Federal Reserve reported Friday. Output of the nation's factories, mines and utilities rose 0.7% in September after an upwardly revised 1.2% gain in August and a 0.9% increase in July, the Fed said. The 0.7% increase in output in September was stronger than the 0.4% gain expected by economists surveyed by MarketWatch. Manufacturing output rose 0.9% in September. Capacity utilization rose to 70.5% in September from a revised 69.9% in August.

Here is a nice picture from Calculated Risk showing the increase in capacity utilization in perspective:

This is also a nice illustration of a little economics riddle: how can there be so much underutilized capacity just sitting around? One answer is the liquidity trap which may well describe where we are - no one wants to lend at any interest rate so we are all just sitting on our hands. But it is this picture essentially that leads the few optimists among us to think that we may be in for a robust recovery. So much capacity tha could ramp up in a very short time period...

No comments: