Sunday, January 27, 2019

Delays in Updating United States Economic Data, United States Industrial Production, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide World Cyclical Slow Growth, Government Intervention in Globalization, and Global Recession Risk: Part I

Delays in Updating United States Economic Data, United States Industrial Production, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide World Cyclical Slow Growth, Government Intervention in Globalization, and Global Recession Risk

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019

I United States Industrial Production

IIB Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates

II 1B Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

III World Financial Turbulence

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

I United States Industrial Production. There is socio-economic stress in the combination of adverse events and cyclical performance:

and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/02/world-financial-turbulence-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html)

Industrial production increased 0.3 percent in Dec 2018 and increased 0.4 percent in Nov 2018 after increasing 0.1 percent in Oct 2018, with all data seasonally adjusted, as shown in Table I-1. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 23, 2018 (https://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):

“The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization.[1] On net, the revisions to total IP for recent years were negative: For the 2015–17 period, the current estimates show rates of change that are 0.4 to 0.7 percentage point lower in each year.[2] Total IP is still reported to have moved up about 22 1/2 percent from the end of the recession in mid-2009 through late 2014. Subsequently, the index declined in 2015, edged down in 2016, and increased in 2017. The incorporation of detailed data for manufacturing from the U.S. Census Bureau's 2016 Annual Survey of Manufactures (ASM) accounts for the majority of the differences between the current and the previously published estimates.

Revisions to capacity for total industry were mixed. Capacity growth was revised up about 1/2 percentage point for 2016, but revisions to other recent years were negative. Capacity for total industry is estimated to have expanded less than 1 percent in 2015, 2016, and 2017, but it is expected to increase about 2 percent in 2018.

In the fourth quarter of 2017, capacity utilization for total industry stood at 77.0 percent, about 1/2 percentage point below its previous estimate and about 3 percentage points below its long-run (1972–2017) average. The utilization rate for 2016 is also lower than the previous estimate.”

The report of the Board of Governors of the Federal Reserve System states (https://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production increased 0.3 percent in December after rising 0.4 percent in November. For the fourth quarter as a whole, total industrial production moved up at an annual rate of 3.8 percent. In December, manufacturing output increased 1.1 percent, its largest gain since February 2018. The output of mines rose 1.5 percent, but the index for utilities fell 6.3 percent, as warmer-than-usual temperatures lowered the demand for heating. At 109.9 percent of its 2012 average, total industrial production was 4.0 percent higher in December than it was a year earlier. Capacity utilization for the industrial sector rose 0.1 percentage point in December to 78.7 percent, a rate that is 1.1 percentage points below its long-run (1972–2017) average.” In the six months ending in Dec 2018, United States national industrial production accumulated change of 2.2 percent at the annual equivalent rate of 4.5 percent, which is higher than growth of 4.0 percent in the 12 months ending in Dec 2018. Excluding growth of 0.8 percent in Aug 2018, growth in the remaining five months from Jul to Dec 2018 accumulated to 1.4 percent or 3.4 percent annual equivalent. Industrial production increased 0.8 percent in one of the past six months, increased 0.4 percent in two months, 0.3 percent in one month, 0.2 percent in one month and 0.1 percent in one month. Industrial production increased at annual equivalent 3.7 percent in the most recent quarter from Oct 2018 to Dec 2018 and increased at 5.3 percent in the prior quarter Jul 2018 to Sep 2018. Business equipment accumulated change of 4.0 percent in the six months from Jul 2018 to Dec 2018, at the annual equivalent rate of 8.1 percent, which is higher than growth of 5.0 percent in the 12 months ending in Dec 2018. The Fed analyzes capacity utilization of total industry in its report (https://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector rose 0.1 percentage point in December to 78.7 percent, a rate that is 1.1 percentage points below its long-run (1972–2017) average.” United States industry apparently decelerated to a lower growth rate followed by possible acceleration and weakening growth in past months. There could be renewed growth.

Table I-1, US, Industrial Production and Capacity Utilization, SA, ∆% 

Dec 18

Nov 18

Oct 18

Sep 18

Aug 18

Jul 18

Dec 18/

Dec 17

Total

0.3

0.4

0.2

0.1

0.8

0.4

4.0

Market
Groups

Final Products

0.2

-0.3

0.6

0.5

0.7

0.2

2.6

Consumer Goods

0.0

-0.6

0.7

0.3

0.4

0.3

1.0

Business Equipment

0.5

0.2

0.3

1.1

1.6

0.2

5.0

Non
Industrial Supplies

0.3

0.0

0.3

-0.3

0.0

-0.2

0.7

Construction

1.6

0.2

-0.4

-0.7

0.3

-0.1

2.1

Materials

0.5

1.1

-0.1

0.0

1.1

0.8

6.1

Industry Groups

Manufacturing

1.1

0.1

-0.2

0.2

0.5

0.4

3.2

Mining

1.5

1.1

-0.2

0.6

2.3

0.8

13.4

Utilities

-6.3

1.3

3.3

-1.3

1.1

0.2

-4.3

Capacity

78.7

78.6

78.4

78.4

78.5

78.0

2.1

Sources: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

Manufacturing increased 1.1 percent in Dec 2018 and increased 0.1 percent in Nov 2018 after decreasing 0.2 percent in Oct 2018, seasonally adjusted, increasing 3.0 percent not seasonally adjusted in the 12 months ending in Dec 2018, as shown in Table I-2. Manufacturing increased cumulatively 2.1 percent in the six months ending in Dec 2018 or at the annual equivalent rate of 4.3 percent. Excluding the increase of 1.1 percent in Dec 2018, manufacturing changed 1.0 percent from Jul 2018 to Dec 2018 or at the annual equivalent rate of 2.4 percent. Table I-2 provides a longer perspective of manufacturing in the US. There has been evident deceleration of manufacturing growth in the US from 2010 and the first three months of 2011 with recovery followed by renewed deterioration/improvement in more recent months as shown by 12 months’ rates of growth. Growth rates appeared to be increasing again closer to 5 percent in Apr-Jun 2012 but deteriorated. The rates of decline of manufacturing in 2009 are quite high with a drop of 18.6 percent in the 12 months ending in Apr 2009. Manufacturing recovered from this decline and led the recovery from the recession. Rates of growth appeared to be returning to the levels at 3 percent or higher in the annual rates before the recession, but the pace of manufacturing fell steadily with some strength at the margin. There is renewed deterioration and improvement. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 23, 2018 (https://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):

“The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization.[1] On net, the revisions to total IP for recent years were negative: For the 2015–17 period, the current estimates show rates of change that are 0.4 to 0.7 percentage point lower in each year.[2] Total IP is still reported to have moved up about 22 1/2 percent from the end of the recession in mid-2009 through late 2014. Subsequently, the index declined in 2015, edged down in 2016, and increased in 2017. The incorporation of detailed data for manufacturing from the U.S. Census Bureau's 2016 Annual Survey of Manufactures (ASM) accounts for the majority of the differences between the current and the previously published estimates.

Revisions to capacity for total industry were mixed. Capacity growth was revised up about 1/2 percentage point for 2016, but revisions to other recent years were negative. Capacity for total industry is estimated to have expanded less than 1 percent in 2015, 2016, and 2017, but it is expected to increase about 2 percent in 2018.

In the fourth quarter of 2017, capacity utilization for total industry stood at 77.0 percent, about 1/2 percentage point below its previous estimate and about 3 percentage points below its long-run (1972–2017) average. The utilization rate for 2016 is also lower than the previous estimate.”

The bottom part of Table I-2 shows manufacturing decreasing 22.3 from the peak in Jun 2007 to the trough in Apr 2009 and increasing 16.1 percent from the trough in Apr 2009 to Dec 2017. Manufacturing grew 19.6 percent from the trough in Apr 2009 to Dec 2018. Manufacturing in Dec 2018 is lower by 7.1 percent relative to the peak in Jun 2007. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.3 percent on average in the cyclical expansion in the 37 quarters from IIIQ2009 to IIIQ2018. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the third estimate of GDP for IIIQ2018 (https://www.bea.gov/system/files/2018-12/gdp3q18_3rd_1.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.8 percent obtained by dividing GDP of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009 {[($15,557.3/$15,134.1) -1]100 = 2.8%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2018/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/12/monetary-policy-rates-near-normal.html). The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.3 percent from IQ1983 to IIIQ1986, 5.1 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.6 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991, 3.8 percent from IQ1983 to IIIQ1991, 3.7 percent from IQ1983 to IVQ1991, 3.7 percent from IQ1983 to IQ1992 and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2018/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/12/monetary-policy-rates-near-normal.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIIQ2018 would have accumulated to 37.4 percent. GDP in IIIQ2018 would be $21,657.0 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $2992.0 billion than actual $18,665.0 billion. There are about two trillion dollars of GDP less than at trend, explaining the 21.2 million unemployed or underemployed equivalent to actual unemployment/underemployment of 12.4 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2019/01/the-fed-will-be-patient-adjusting.html and earlier https://cmpassocregulationblog.blogspot.com/2018/12/fluctuation-of-valuations-of-risk.html). US GDP in IIIQ2018 is 13.8 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $18,665.0 billion in IIIQ2018 or 18.4 percent at the average annual equivalent rate of 1.6 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Dec 1919 to Dec 2018. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.3221 in Dec 2007 to 151.5426 in Dec 2018. The actual index NSA in Dec 2018 is 104.3366, which is 31.2 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Dec 2018. Using trend growth of 2.0 percent per year, the index would increase to 134.6444 in Dec 2018. The output of manufacturing at 104.3366 in Dec 2018 is 22.5 percent below trend under this alternative calculation.

Table I-2, US, Monthly and 12-Month Rates of Growth of Manufacturing ∆%

Month SA ∆%

12-Month NSA ∆%

Dec 2018

1.1

3.0

Nov

0.1

2.0

Oct

-0.2

2.2

Sep

0.2

3.9

Aug

0.5

3.5

Jul

0.4

2.7

Jun

0.7

2.0

May

-1.0

1.4

Apr

0.6

3.3

Mar

-0.1

2.4

Feb

1.5

2.1

Jan

-0.5

0.9

Dec 2017

0.0

1.8

Nov

0.2

2.1

Oct

1.3

1.8

Sep

-0.1

0.7

Aug

-0.2

1.2

Jul

-0.3

1.4

Jun

0.1

1.5

May

-0.4

1.8

Apr

1.1

0.4

Mar

-0.5

1.1

Feb

0.1

0.7

Jan

0.3

0.1

Dec 2016

0.3

0.4

Nov

0.0

-0.2

Oct

0.2

-0.3

Sep

0.3

-0.2

Aug

-0.3

-1.5

Jul

0.2

-1.4

Jun

0.3

-0.8

May

-0.1

-1.5

Apr

-0.3

-0.8

Mar

-0.2

-1.8

Feb

-0.4

-0.6

Jan

0.5

-0.7

Dec 2015

-0.2

-1.9

Nov

-0.2

-1.7

Oct

0.0

-0.8

Sep

-0.4

-1.7

Aug

-0.3

-0.7

Jul

0.6

-0.4

Jun

-0.4

-1.1

May

-0.1

-0.3

Apr

-0.1

-0.1

Mar

0.3

-0.1

Feb

-0.6

0.5

Jan

-0.5

1.9

Dec 2014

-0.3

1.5

Nov

0.8

1.7

Oct

-0.1

0.9

Sep

0.0

1.1

Aug

-0.4

1.3

Jul

0.3

2.0

Jun

0.3

1.4

May

0.2

1.3

Apr

-0.1

0.9

Mar

0.8

1.6

Feb

1.1

0.3

Jan

-1.2

-0.5

Dec 2013

0.0

0.1

Nov

0.0

1.2

Oct

0.1

1.9

Sep

0.1

1.2

Aug

1.0

1.3

Jul

-1.0

0.3

Jun

0.2

0.8

May

0.3

0.9

Apr

-0.4

1.0

Mar

-0.1

0.6

Feb

0.5

0.7

Jan

-0.3

0.8

Dec 2012

0.8

1.7

Nov

0.7

1.7

Oct

-0.4

0.7

Sep

-0.1

1.6

Aug

-0.2

2.1

Jul

-0.1

2.5

Jun

0.2

3.4

May

-0.4

3.4

Apr

0.6

3.8

Mar

-0.5

2.8

Feb

0.4

4.1

Jan

0.8

3.5

Dec 2011

0.7

3.1

Nov

-0.3

2.7

Oct

0.6

2.8

Sep

0.3

2.6

Aug

0.4

2.1

Jul

0.6

2.3

Jun

0.1

1.7

May

0.1

1.5

Apr

-0.6

2.7

Mar

0.6

4.2

Feb

0.1

4.8

Jan

0.2

4.8

Dec 2010

0.5

5.4

Nov

0.0

4.5

Oct

0.1

5.8

Sep

0.0

6.1

Aug

0.1

6.8

Jul

0.6

7.4

Jun

-0.1

9.2

May

1.4

8.9

Apr

0.8

7.3

Mar

1.2

5.2

Feb

-0.1

1.7

Jan

1.1

1.7

Dec 2009

-0.2

-2.9

Nov

1.0

-5.8

Oct

0.2

-8.9

Sep

0.9

-10.4

Aug

1.1

-13.5

Jul

1.5

-15.3

Jun

-0.3

-17.9

May

-1.0

-17.9

Apr

-0.7

-18.6

Mar

-1.8

-17.8

Feb

-0.2

-16.7

Jan

-3.1

-17.0

Dec 2008

-3.5

-14.5

Nov

-2.4

-11.7

Oct

-0.6

-9.2

Sep

-3.4

-8.8

Aug

-1.2

-5.2

Jul

-1.2

-3.7

Jun

-0.7

-3.2

May

-0.6

-2.4

Apr

-1.1

-1.0

Mar

-0.3

-0.5

Feb

-0.6

1.1

Jan

-0.4

2.5

Dec 2007

0.2

2.1

Nov

0.5

3.5

Oct

-0.3

2.9

Sep

0.5

3.0

Aug

-0.3

2.7

Jul

0.1

3.6

Jun

0.3

3.1

May

-0.1

3.2

Apr

0.7

3.6

Mar

0.8

2.6

Feb

0.4

1.6

Jan

-0.5

1.2

Dec 2006

2.7

Dec 2005

3.6

Dec 2004

4.1

Dec 2003

2.2

Dec 2002

2.4

Dec 2001

-5.3

Dec 2000

0.8

Dec 1999

5.2

Average ∆% Dec 1986-Dec 2018

2.0

Average ∆% Dec 1986-Dec 2017

2.0

Average ∆% Dec 1986-Dec 2016

2.0

Average ∆% Dec 1986-Dec 2015

2.0

Average ∆% Dec 1986-Dec 2014

2.2

Average ∆% Dec 1986-Dec 2013

2.2

Average ∆% Dec 1986-Dec 1999

4.3

Average ∆% Dec 1999-Dec 2006

1.5

Average ∆% Dec 1999-Dec 2017

0.3

Average ∆% Dec 1999-Dec 2018

0.4

∆% Peak 112.3300 in 06/2007 to 101.3446 in 12/2017

-9.8

∆% Peak 112.3300 in 06/2007 to Trough 87.2739 in 4/2009

-22.3

∆% Trough 87.2739 in 04/2009 to 101.3446 in 12/2017

16.1

∆% Trough 87.2739 in 04/2009 to 104.3366 in 12/2018

19.6

∆% Peak 112.3300 in 06/2007 to 104.3366 in 12/2018

-7.1

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

Chart I-1 of the Board of Governors of the Federal Reserve System provides industrial production, manufacturing and capacity since the 1970s. There was acceleration of growth of industrial production, manufacturing and capacity in the 1990s because of rapid growth of productivity in the US (Cobet and Wilson (2002); see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). The slopes of the curves flatten in the 2000s. Production and capacity have not recovered sufficiently above levels before the global recession, remaining like GDP below historical trend. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Dec 1919 to Dec 2018. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.3221 in Dec 2007 to 151.5426 in Dec 2018. The actual index NSA in Dec 2018 is 104.3366, which is 31.2 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Dec 2018. Using trend growth of 2.0 percent per year, the index would increase to 134.6444 in Dec 2018. The output of manufacturing at 104.3366 in Dec 2018 is 22.5 percent below trend under this alternative calculation.

clip_image001

Chart I-1, US, Industrial Production, Capacity and Utilization

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/ipg1.gif

The modern industrial revolution of Jensen (1993) is captured in Chart I-2 of the Board of Governors of the Federal Reserve System (for the literature on M&A and corporate control see Pelaez and Pelaez, Regulation of Banks and Finance (2009a), 143-56, Globalization and the State, Vol. I (2008a), 49-59, Government Intervention in Globalization (2008c), 46-49). The slope of the curve of total industrial production accelerates in the 1990s to a much higher rate of growth than the curve excluding high-technology industries. Growth rates decelerate into the 2000s and output and capacity utilization have not recovered fully from the strong impact of the global recession. Growth in the current cyclical expansion has been more subdued than in the prior comparably deep contractions in the 1970s and 1980s. Chart I-2 shows that the past recessions after World War II are the relevant ones for comparison with the recession after 2007 instead of common comparisons with the Great Depression (https://cmpassocregulationblog.blogspot.com/2018/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2018/12/monetary-policy-rates-near-normal.html). The bottom left-hand part of Chart II-2 shows the strong growth of output of communication equipment, computers and semiconductor that continued from the 1990s into the 2000s. Output of semiconductors has already surpassed the level before the global recession.

clip_image002

Chart I-2, US, Industrial Production, Capacity and Utilization of High Technology Industries

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/ipg3.gif

Additional detail on industrial production and capacity utilization is in Chart I-3 of the Board of Governors of the Federal Reserve System. Production of consumer durable goods fell sharply during the global recession by more than 30 percent and is oscillating above the level before the contraction. Output of nondurable consumer goods fell around 10 percent and is some 5 percent below the level before the contraction. Output of business equipment fell sharply during the contraction of 2001 but began rapid growth again after 2004. An important characteristic is rapid growth of output of business equipment in the cyclical expansion after sharp contraction in the global recession, stalling in the final segment. Output of defense and space only suffered reduction in the rate of growth during the global recession and surged ahead of the level before the contraction, declining in the final segment. Output of construction supplies collapsed during the global recession and is well below the level before the contraction. Output of energy materials was stagnant before the contraction but recovered sharply above the level before the contraction with alternating recent decline/improvement.

clip_image003

Chart I-3, US, Industrial Production and Capacity Utilization

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/ipg2.gif

United States manufacturing output from 1919 to 2018 monthly is in Chart I-4 of the Board of Governors of the Federal Reserve System. The second industrial revolution of Jensen (1993) is quite evident in the acceleration of the rate of growth of output given by the sharper slope in the 1980s and 1990s. Growth was robust after the shallow recession of 2001 but dropped sharply during the global recession after IVQ2007. Manufacturing output recovered sharply but has not reached earlier levels and is losing momentum at the margin. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Dec 1919 to Dec 2018. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.3221 in Dec 2007 to 151.5426 in Dec 2018. The actual index NSA in Dec 2018 is 104.3366, which is 31.2 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Dec 2018. Using trend growth of 2.0 percent per year, the index would increase to 134.6444 in Dec 2018. The output of manufacturing at 104.3366 in Dec 2018 is 22.5 percent below trend under this alternative calculation.

clip_image004

Chart I-4, US, Manufacturing Output, 1919-2018

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

Manufacturing jobs not seasonally adjusted increased 284,000 from Dec 2017 to
Dec 2018 or at the average monthly rate of 23,667. Industrial production increased 0.3 percent in Dec 2018 and increased 0.4 percent in Nov 2018 after increasing 0.2 percent in Oct 2018, with all data seasonally adjusted. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 23, 2018 (https://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):

“The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization.[1] On net, the revisions to total IP for recent years were negative: For the 2015–17 period, the current estimates show rates of change that are 0.4 to 0.7 percentage point lower in each year.[2] Total IP is still reported to have moved up about 22 1/2 percent from the end of the recession in mid-2009 through late 2014. Subsequently, the index declined in 2015, edged down in 2016, and increased in 2017. The incorporation of detailed data for manufacturing from the U.S. Census Bureau's 2016 Annual Survey of Manufactures (ASM) accounts for the majority of the differences between the current and the previously published estimates.

Revisions to capacity for total industry were mixed. Capacity growth was revised up about 1/2 percentage point for 2016, but revisions to other recent years were negative. Capacity for total industry is estimated to have expanded less than 1 percent in 2015, 2016, and 2017, but it is expected to increase about 2 percent in 2018.

In the fourth quarter of 2017, capacity utilization for total industry stood at 77.0 percent, about 1/2 percentage point below its previous estimate and about 3 percentage points below its long-run (1972–2017) average. The utilization rate for 2016 is also lower than the previous estimate.”

Manufacturing decreased 22.3 from the peak in Jun 2007 to the trough in Apr 2009 and increasing 16.1 percent from the trough in Apr 2009 to Dec 2017. Manufacturing grew 19.6 percent from the trough in Apr 2009 to Dec 2018. Manufacturing in Dec 2018 is lower by 7.1 percent relative to the peak in Jun 2007. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIIQ2018 would have accumulated to 37.4 percent. GDP in IIIQ2018 would be $21,657.0 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $2992.0 billion than actual $18,665.0 billion. There are about two trillion dollars of GDP less than at trend, explaining the 21.2 million unemployed or underemployed equivalent to actual unemployment/underemployment of 12.4 percent of the effective labor force (https://cmpassocregulationblog.blogspot.com/2019/01/the-fed-will-be-patient-adjusting.html and earlier https://cmpassocregulationblog.blogspot.com/2018/12/fluctuation-of-valuations-of-risk.html). US GDP in IIIQ2018 is 13.8 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $18,665.0 billion in IIIQ2018 or 18.4 percent at the average annual equivalent rate of 1.6 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Dec 1919 to Dec 2018. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.3221 in Dec 2007 to 151.5426 in Dec 2018. The actual index NSA in Dec 2018 is 104.3366, which is 31.2 percent below trend. Manufacturing output grew at average 2.0 percent between Dec 1986 and Dec 2018. Using trend growth of 2.0 percent per year, the index would increase to 134.6444 in Dec 2018. The output of manufacturing at 104.3366 in Dec 2018 is 22.5 percent below trend under this alternative calculation.

Table I-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.2 percent in IIIQ2018. Most of US national income is in the form of services. In Dec 2018, there were 151.190 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 128,431 million NSA in Nov 2018 accounted for 84.9 percent of total nonfarm jobs of 151.190 million, of which 12.844 million, or 10.0 percent of total private jobs and 8.5 percent of total nonfarm jobs, were in manufacturing. Private service-providing jobs were 107.575 million NSA in Dec 2018, or 71.2 percent of total nonfarm jobs and 83.8 percent of total private-sector jobs. Manufacturing has share of 9.5 percent in US national income in IIIQ2018 and durable goods 5.7 percent, as shown in Table I-13. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table I-13, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

SSAR IIQ2018

% Total

SAAR IIIQ2018

% Total

National Income WCCA

16,971.8

100.0

17,212.9

100.0

Domestic Industries

16,704.8

98.4

16,957.8

98.5

Private Industries

14,770.7

87.0

15,006.6

87.2

Agriculture

134.5

0.8

121.4

0.7

Mining

185.2

1.1

187.1

1.1

Utilities

164.2

1.0

164.0

1.0

Construction

902.6

5.3

914.7

5.3

Manufacturing

1598.0

9.4

1640.0

9.5

Durable Goods

955.4

5.6

981.2

5.7

Nondurable Goods

642.5

3.8

658.8

3.8

Wholesale Trade

918.7

5.4

968.3

5.6

Retail Trade

1136.2

6.7

1169.8

6.8

Transportation & WH

549.1

3.2

554.0

3.2

Information

672.5

4.0

680.9

4.0

Finance, Insurance, RE

2975.7

17.5

3013.6

17.5

Professional & Business Services

2517.9

14.8

2545.9

14.8

Education, Health Care

1759.2

10.4

1775.9

10.3

Arts, Entertainment

752.2

4.4

763.1

4.4

Other Services

504.7

3.0

508.0

3.0

Government

1934.0

11.4

1951.3

11.3

Rest of the World

267.0

1.6

255.0

1.5

Notes: SSAR: Seasonally-Adjusted Annual Rate; Percentages Calculates from Unrounded Data; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services

Source: US Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-1A provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In IIQ2018, light vehicle sales accumulated to 4,500,220, which is higher by 1.8 percent relative to 4,419,349 a year earlier in IIQ2017 (http://www.motorintelligence.com/m_frameset.html). Total not seasonally adjusted light vehicle sales reached 1379.8 thousands in Nov 2018, decreasing 0.7 percent from 1389.2 thousands in Nov 2017 (https://www.bea.gov/national/xls/gap_hist.xlsx). The seasonally adjusted annual rate of light vehicle sales in the US reached 17.4 million in Nov 2018, lower than 17.5 million in Oct 2018 and lower than 17.5 million in Nov 2017 (https://www.bea.gov/national/xls/gap_hist.xlsx).

Table VA-1A, US, New Motor Vehicle Sales and Car Production, Thousand Units 7

New Motor Vehicle Sales

New Car Sales and Leases

New Truck Sales and Leases

Domestic Car Production

1990

14,137

9,300

4,837

6,231

1991

12,725

8,589

4,136

5,454

1992

13,093

8,215

4,878

5,979

1993

14,172

8,518

5,654

5,979

1994

15,397

8,990

6,407

6,614

1995

15,106

8,536

6,470

6,340

1996

15,449

8,527

6,922

6,081

1997

15,490

8,273

7,218

5,934

1998

15,958

8,142

7,816

5,554

1999

17,401

8,697

8,704

5,638

2000

17,806

8,852

8,954

5,542

2001

17,468

8,422

9,046

4,878

2002

17,144

8,109

9,036

5,019

2003

16,968

7,611

9,357

4,510

2004

17,298

7,545

9,753

4,230

2005

17,445

7,720

9,725

4,321

2006

17,049

7,821

9,228

4,367

2007

16,460

7,618

8,683

3,924

2008

13,494

6,814

6.680

3,777

2009

10,601

5,456

5,154

2,247

2010

11,772

5,729

6,044

2,840

Source: US Census Bureau

http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

Chart I-5 of the Board of Governors of the Federal Reserve provides output of motor vehicles and parts in the United States from 1972 to 2018. Output virtually stagnated since the late 1990s with recent increase.

clip_image005

Chart 1-5, US, Motor Vehicles and Parts Output, 1972-2018

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

Chart I-6 of the Board of Governors of the Federal Reserve System provides output of computers and electronic products in the United States from 1972 to 2018. Output accelerated sharply in the 1990s and 2000s and surpassed the level before the global recession beginning in IVQ2007.

clip_image006

Chart I-6, US, Output of Computers and Electronic Products, 1972-2018

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

Chart I-7 of the Board of Governors of the Federal Reserve System shows that output of durable manufacturing accelerated in the 1980s and 1990s with slower growth in the 2000s perhaps because processes matured. Growth was robust after the major drop during the global recession but appears to vacillate in the final segment.

clip_image007

Chart I-7, US, Output of Durable Manufacturing, 1972-2018

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

Chart I-8 of the Board of Governors of the Federal Reserve System provides output of aerospace and miscellaneous transportation equipment from 1972 to 2018. There is long-term upward trend with oscillations around the trend and cycles of large amplitude.

clip_image008

Chart I-8, US, Output of Aerospace and Miscellaneous Transportation Equipment, 1972-2018

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

The Empire State Manufacturing Survey Index in Table VA-1 provides continuing deterioration that started in Jun 2012 well before Hurricane Sandy in Oct 2012. The current general index has been in negative contraction territory from minus 2.6 in Aug 2012 to minus 7.7 in Jan 2013 and minus 0.3 in May 2013. The current general index changed to 3.9 in Jan 2019. The index of current orders has also been in negative contraction territory from minus 2.6 in Aug 2012 to minus 11.0 in Jan 2013 and minus 8.2 in Jun 2013. The index of current new orders changed to 3.5 in Jan 2019. There is weakening in the general index for the next six months at 17.8 in Jan 2019 and new orders at 19.5.

Table VA-1, US, New York Federal Reserve Bank Empire State Manufacturing Survey Index SA

Current General Index

Current New Orders

Future General Index

Future New Orders

9/30/2011

-4.3

-4.5

22.5

23.4

10/31/2011

-5.7

1.6

14.4

19.4

11/30/2011

4.8

1.5

35.3

30.1

12/31/2011

11.5

10.2

45.9

43.8

1/31/2012

11.3

8.7

50.4

44.3

2/29/2012

17.2

7

46.3

37.7

3/31/2012

15.3

4.4

43.9

37.7

4/30/2012

7.9

4.2

40.1

38.1

5/31/2012

14.8

7.2

32.4

31.9

6/30/2012

1.5

2.9

27.8

28.3

7/31/2012

3.3

-3.4

24.6

21.9

8/31/2012

-2.6

-3

18.9

14.7

9/30/2012

-6.8

-10.1

27

27.9

10/31/2012

-4.6

-6.8

20

22.3

11/30/2012

-0.8

6.1

18

14.5

12/31/2012

-5.9

0.4

19.7

20.2

1/31/2013

-7.7

-11

21

23.5

2/28/2013

8.9

12.2

32

27

3/31/2013

4.7

4.7

35

32.9

4/30/2013

4.6

3

30

35.3

5/31/2013

-0.3

-2.8

26.6

30.3

6/30/2013

4.2

-8.2

27.7

22.2

7/31/2013

5.4

2.3

34.3

33.4

8/31/2013

9.7

2.9

35.9

30.9

9/30/2013

7.8

3.2

40.3

38.1

10/31/2013

3.7

9.2

41.4

36.9

11/30/2013

2.3

-2.4

38.1

39.2

12/31/2013

3.1

1.3

37.3

28.8

1/31/2014

12.5

7.9

34.8

37.1

2/28/2014

6.3

1.7

40

43.7

3/31/2014

2.2

0.9

35.2

36.3

4/30/2014

4.3

-0.2

37.9

34.3

5/31/2014

19

9

43.8

38.7

6/30/2014

15.2

12.5

41.1

44.2

7/31/2014

21.1

16.5

31.2

27.7

8/31/2014

16.2

15.6

45.8

50.4

9/30/2014

29.5

17.8

46.7

45.8

10/31/2014

6.4

1.3

42.2

42.2

11/30/2014

12

10.5

47.9

47.7

12/31/2014

-2.4

0.7

36.6

37.2

1/31/2015

12.1

6.5

45.4

40.3

2/28/2015

10

2.9

27.4

29.2

3/31/2015

3

-6.3

31

26

4/30/2015

0.4

-4.4

36.3

33.7

5/31/2015

5.7

4.2

31.6

35.2

6/30/2015

-5.8

-8

25.8

26.6

7/31/2015

1.9

-5

30

33.8

8/31/2015

-13.6

-14.3

32.8

30.8

9/30/2015

-12.7

-11.1

23.7

24.2

10/31/2015

-13.5

-16.1

22.6

22.8

11/30/2015

-9.5

-11

22.2

18.6

12/31/2015

-5.7

-5.5

35.2

26.8

1/31/2016

-16.9

-21.6

9.5

13.9

2/29/2016

-13.6

-10.2

14.5

20.6

3/31/2016

-3.5

2.7

25.6

36.7

4/30/2016

9.4

11

29.2

37

5/31/2016

-5.5

-1.9

29.8

24.3

6/30/2016

1.7

5.2

32.9

37.1

7/31/2016

1.6

-1.8

32

31.8

8/31/2016

-5.3

1.1

25

28.9

9/30/2016

-1.7

-5.5

34.8

32.6

10/31/2016

-9.2

-3.4

35.6

37.8

11/30/2016

2.1

3.7

29.9

26

12/31/2016

9.8

10.1

49.5

47.9

1/31/2017

6.9

5.2

47.4

39.1

2/28/2017

19.3

12.9

40.1

40.5

3/31/2017

14.2

16.5

37.9

33.8

4/30/2017

6.7

10.3

40.1

33.7

5/31/2017

3.4

-1.1

41.6

36

6/30/2017

17.4

14.7

41.1

41.5

7/31/2017

12

13.3

37.8

35.9

8/31/2017

22.9

20.5

43.7

41.4

9/30/2017

23.4

24.8

41.4

44

10/31/2017

27.1

19.6

45.3

44.6

11/30/2017

19.3

19.6

49.4

50.4

12/31/2017

20.3

18.1

46.4

43.4

1/31/2018

18.6

14.3

46.6

47.2

2/28/2018

16.4

14.3

49.4

46.3

3/31/2018

21.9

15.3

44.1

42.5

4/30/2018

17.9

12

19.3

19.7

5/31/2018

20.6

17.4

33.2

35.5

6/30/2018

24.4

19.8

38.3

34.9

7/31/2018

22

18.3

32.3

37.2

8/31/2018

24.3

16.5

34.4

36.2

9/30/2018

18.8

17.5

31.1

34.2

10/31/2018

20

20.8

29.6

35.1

11/30/2018

21.4

18.6

32.9

36.5

12/31/2018

11.5

13.4

30.6

34.8

1/31/2019

3.9

3.5

17.8

19.5

Source:

http://www.ny.frb.org/survey/empire/empiresurvey_overview.html

Chart VA-1 of the Federal Reserve Bank of New York provides indexes of current and expected economic activity. There were multiple contractions in current activity after the global recession shown in shade. Current activity is weakening relative to strong recovery in the initial expansion in 2010 and 2011 with recent recovery.

clip_image010

Chart VA-1, US, US, Federal Reserve Bank of New York, Diffusion Index of Current and Expected Activity, Seasonally Adjusted

Source: Federal Reserve Bank of New York

http://www.ny.frb.org/survey/empire/empiresurvey_overview.html

Table VA-2 shows improvement after prior deterioration followed by current soft improvement of the Business Outlook survey of the Federal Reserve Bank of Philadelphia. The general index moved out of contraction of 5.5 in Feb 2013 to expansion at 17.0 in Jan 2019. New orders moved from 0.4 in Feb 2013 to 21.3 in Jan 2019. There is expansion in the future general index at 31.2 in Jan 2019 and in future new orders at 32.2 in Jan 2019.

Table VA-2, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, SA

Current General Index

Current New Orders

Future General Index

Future New Orders

Jan-11

16.5

20.2

43.9

35.9

Feb-11

28.9

19.7

41.9

38.8

Mar-11

36.4

34.1

57.0

55.5

Apr-11

12.9

13.7

35.7

30.9

May-11

6.2

8.3

26.2

25.3

Jun-11

-0.5

-5.2

8.4

8.3

Jul-11

7.1

4.1

28.6

32.3

Aug-11

-19.4

-17.5

12.5

26.6

Sep-11

-10.7

-5.6

18.1

19.6

Oct-11

6.1

5.9

26.2

28.6

Nov-11

4.0

1.5

36.4

36.2

Dec-11

2.4

4.4

33.7

38.7

Jan-12

7.5

10.7

43.4

43.6

Feb-12

10.3

11.5

30.3

32.3

Mar-12

8.8

-0.1

30.4

37.2

Apr-12

5.7

0.6

39.9

42.4

May-12

-0.8

2.3

24.8

35.5

Jun-12

-12.5

-17.8

25.3

33.6

Jul-12

-12.6

-3.6

21.5

25.7

Aug-12

-2.5

1.6

20

25.5

Sep-12

0.2

0.7

31.6

42.8

Oct-12

-1.3

-4.7

17.2

20.8

Nov-12

-10.5

-7.3

16.7

22.8

Dec-12

2.5

2.6

22.4

29

Jan-13

-1.4

-2

29.2

32

Feb-13

-5.5

0.4

32.1

39.1

Mar-13

2

0.2

35.6

38.1

Apr-13

0.4

0.6

30.7

34.5

May-13

0.3

-4.1

39.3

42.2

Jun-13

12.6

11.7

37

39

Jul-13

15.9

7.5

41.5

52.5

Aug-13

8.4

9

38.4

38.8

Sep-13

20.6

19.3

48.7

51.6

Oct-13

13.3

23.1

55.4

61

Nov-13

4.6

9

42.1

46.6

Dec-13

3.9

11.8

41.1

44.7

Jan-14

15.4

8

38.4

40.9

Feb-14

1.8

4.2

44

39.6

Mar-14

12.6

6.6

42.6

38.7

Apr-14

16.9

17.4

39.4

38.8

May-14

18.4

14.8

43.3

42.5

Jun-14

14.2

10.4

52.8

53.6

Jul-14

21.5

28.8

53.5

49

Aug-14

23.2

15.6

61.9

51.4

Sep-14

21.8

13.9

46

44.8

Oct-14

17.9

17

50.8

49.1

Nov-14

35.6

29.8

50.4

45.3

Dec-14

21.7

14.1

47.2

44.2

Jan-15

13.4

10.6

54.9

47.3

Feb-15

9.9

7.6

35.5

46.2

Mar-15

7.4

0.9

38

37.6

Apr-15

9.7

4.5

39.6

33.6

May-15

6

5.3

37.4

34.9

Jun-15

8.2

11.2

42.3

45.3

Jul-15

4.6

2.4

40.5

45.5

Aug-15

6.5

7.1

34.7

39.6

Sep-15

-3.7

10.6

36.7

41.8

Oct-15

-5.2

-6.2

34.8

36.7

Nov-15

-3.8

-7.5

37.9

45.7

Dec-15

-9.2

-9.9

18.7

30.5

Jan-16

-3.5

-1.3

19.1

21.6

Feb-16

-7.9

-7.3

17.1

19.9

Mar-16

9.5

5.2

27.2

34.7

Apr-16

-1.6

-0.4

39.4

43.3

May-16

-5.1

-2.6

38.2

39.3

Jun-16

4.2

-0.7

34.5

34.9

Jul-16

1.6

10.1

37.2

35.9

Aug-16

6.5

-0.6

41.9

43.6

Sep-16

12.4

3.6

36.6

38.7

Oct-16

10.2

20.4

36.1

40.9

Nov-16

9.6

18.9

30.6

37.1

Dec-16

21.8

14.3

46

46.2

Jan-17

26

27.9

55.6

52.6

Feb-17

37.8

32.9

52.2

48.8

Mar-17

32.2

29.9

56.2

57.1

Apr-17

22.5

28.6

44.9

54.5

May-17

34

23.3

38

47.5

Jun-17

27.6

27.3

35.8

36.8

Jul-17

22.3

5.3

40.9

46.4

Aug-17

22.8

24.9

42.6

51.4

Sep-17

24.2

28

53.1

59.2

Oct-17

26.6

22.9

46.5

44.9

Nov-17

23.9

25.4

49

51.6

Dec-17

27.8

27.7

50.7

56.5

Jan-18

24.8

13.7

46.7

48.7

Feb-18

28.1

26.4

42.5

49

Mar-18

23.8

27.4

46.2

47

Apr-18

23.4

22.2

40.9

39.2

May-18

32.3

38.5

38.8

40.6

Jun-18

20.8

21.2

35.3

38.5

Jul-18

24.3

24.9

30.4

32.8

Aug-18

13

15.3

37.2

38.6

Sep-18

21.4

20.6

34.5

36.7

Oct-18

19.7

18.4

32.4

40.9

Nov-18

11.9

10.6

27.9

41.9

Dec-18

9.1

13.3

29.9

38.5

Jan-19

17

21.3

31.2

32.2

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

Chart VA-2 of the Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey provides the current and future general activity indexes from Jan 2007 to Dec 2018. The shaded areas are the recession cycle dates of the National Bureau of Economic Research (NBER) (http://www.nber.org/cycles.html). The Philadelphia Fed index dropped during the initial period of recession and then led the recovery, as industry overall. There was a second decline of the index into 2011 followed now by what appeared as renewed strength from late 2011 into Jan 2012. There is decline to negative territory of the current activity index in Nov 2012 and return to positive territory in Dec 2012 with decline of current conditions into contraction in Jan-Feb 2013 and rebound to mild expansion in Mar-Apr 2013. The index of current activity moved into expansion in Jun-Oct 2013 with weakness in Nov-Dec 2013, improving in Jan 2014. There is renewed deterioration in Feb 2014 with rebound in Apr-Sep 2014 and mild deterioration in Oct 2014 followed by improvement in Nov 2014. The index deteriorated in Jan-Feb 2015, stabilizing in Mar-May 2015 and improving in Jun 2015. The index deteriorated in Jul 2015, improved in Aug 2015 and deteriorated in Sep-Oct 2015. The index shows contraction in Nov 2015 to Feb 2016 with recovery in Mar 2016. There is deterioration in Apr-May 2016 with improvement in Jun 2016 and deterioration in Jul 2016. There is improvement in Aug-Sep 2016 with moderate weakening in Oct-Nov 2016. The indexes improved sharply in Dec 2016 and Jan-Feb 2017, softening in Mar-Apr 2017. The current index weakened in Jun 2017 with stability in the six-month forecast. The current index deteriorated in Jul 2017 with improvement in the six-month forecast. The current index deteriorated in Aug 2017 with improvement in the six-month forecast. The current index improved in Sep 2017 with improvement in the six-month forecast. The current index improved and the future index deteriorated in Oct 2017. There is deterioration in Nov 2017 of the current index and improvement of the future index. Both the current and future indexes improved in Dec 2017, deteriorating in Jan 2018. There is improvement of the current index in Feb 2018 with mild deterioration in the future index. The current index improves in Apr 2018 while the future index weakens. There is improvement in the current index in May 2018 with weakening of the future index. There is weakening in the current index in Jun 2018 while the future index weakens. The current index improves in Jul 2018 while the future index weakens. There is weakening of the current index in Aug 2018 while the future index improves. The current index improves in Sep 2018 while the future index weakens. The current index weakens in Oct 2018 while the future index weakens. The current index deteriorates in Nov 2018 while the future index deteriorates. The current index deteriorates in Dec 2018 while the future index improves. The current index improves in Jan 2019 while the future index improves.

clip_image011

Chart VA-2, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Activity Indexes

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

The index of current new orders of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia in Chart VA-2 illustrates the weakness of the cyclical expansion. The index weakened in 2006 and 2007 and then fell sharply into contraction during the global recession. There have been twelve readings into contraction from Jan 2012 to May 2013 and generally weak readings with some exceptions. The index of new orders moved into expansion in Jun-Oct 2013 with moderation in Nov-Dec 2013 and into Jan 2014. The index fell into contraction in Feb 2014, recovering in Mar-Apr 2014 but weaker reading in May 2014. There is marked improvement in Jun-Jul 2014 with slowing in Aug-Oct 2014 followed by acceleration in Nov 2014. New orders deteriorated in Jan-Apr 2015, improving in May-Jun 2015. New orders deteriorated in Jul-Aug 2015 and improved in Sep 2015. New orders deteriorated in Oct-2015 to Dec 2015, contracting at slower pace in Jan 2016. There is sharper contraction in Feb 2016 and an upward jump in Mar 2016 followed by deterioration in Apr-Jun 2016. New orders improved in Jul 2016, deteriorating in Aug 2016 and improving in Sep 2016. Improvement continued in Oct-Nov 2016 with mild deterioration in Dec 2016 followed by improvement in Jan-Feb 2017, softening in Mar-Jul 2017, recovering in Aug-Sep 2017. There is deterioration in Oct 2017 followed by improvement in Nov-Dec 2017. There is deterioration in Jan 2018 followed by improvement in Feb 2018 and improvement in Mar 2018. The index deteriorates in Apr 2018, improving in May 2018. The index deteriorates in Jun 2018, improving in Jul 2018 and deteriorating in Aug 2018. The index improves in Sep 2018, deteriorating in Oct 2018. The index weakens in Nov 2018, improving in Dec 2018. The index improves in Jan 2019.

clip_image012

Chart VA-3, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current New Orders Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

https://www.philadelphiafed.org/

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019.

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