Economic Data Summary: Week Ended June 18th, 2010

This was a decidedly mixed week of economic data. Industrial production was quite strong, but housing starts and the Philly Fed were fairly weak.

May Industrial Production 

This was the highlight of the week. 1.2% on the headline number, 0.9% on manufacturing, 1.3% on business equipment, construction equipment up 0.8%, and so on. There was not a weak component in the entire report except for mining, which is always quite volatile. Just to make the point about the strength of the recovery in manufacturing, here is a comparison of the past three recessions:

There is a V-shaped recovery, but it is only in manufacturing. Still, I consider industrial production one of the very best coincident indicators so this is an encouraging sight.

May Housing Starts and Building Permits

If everything about industrial production was good, everything about housing starts was bad. Starts were down 10.0% and permits were down by 5.9%, indicating future weakness in starts. Weakness was widespread and should be expected to continue going forward as the distorting effects of the tax credit wane. I expect there to be many mixed signals in the next few months on housing and don't expect there to be a definitive up-trend until either the end of the year or well into next year. A potential full on relapse in housing with prices and sales falling on a sustained basis is not out of the question, though the magnitudes would be much less if for no other reason that there is not much room on the downside.

Economic Data Summary: Week Ending May 14th, 2010

The economic data this week were once again fairly positive so the general story of a moderately strong economic recovery remains in place. I will editorialize a bit here to say that compared to the expectations of many 8-12 months ago, we are having a much stronger recovery than projected.

April Industrial Production


My personal favorite coincident indicator as it is the proxy for determining the demand for goods. Manufacturers will not produce if they do not think that there is a market for their goods. The one wrinkle in this is that inventory trends can be a short term driver of the industrial production index, making it unclear how much growth is due to restocking of inventories and how much is actually because of growing end-demand. Industrial production is released by the Fed right about the middle of the month every month.

In line with what we have been seeing out of the manufacturing diffusion indices, industrial production showed strong growth in April with 0.8% growth on the headline number. Below the surface, business equipment grew 1.0% and construction supplies 2.8%. March and January were revised higher, February lower. The diffusion indices also showed broad based growth.

Here's a look at the manufacturing index subset (does not include utilities and mining):

Yes, we are still far below the peak, but the pattern of recovery remains firmly intact. There are not even signs of wheezing at this moment.