Thursday, May 15, 2008

Industrial production continues its slump

The Industrial Production report for April registered a moderate decline in production, continuing to suggest that the economy is near the edge of a recession. A significant portion of the -0.7% decline (but not all of it) in April was due to strikes in the auto industry, as the report puts it:

... factory output in April was held down by a large drop in the index for motor vehicles and parts; strikes and strike-related parts shortages resulted in suspended production at many facilities.

Industrial production peaked in January, but is still not in recession territory as it is still up (+0.2%) over a year ago.

There was good news on the tech front:

In contrast, the output of computer and electronic products moved up more than 1 percent for the third consecutive month.

The IP (Industrial Production) report is a key input to the NBER Business Cycle Dating Committee as they deliberate on whether and when we enter a recession. This report points the accumulated evidence a little closer to recession, but does not by itself make a strong case for recession. Clearly there is a slump, a slowdown, but it will take a few more months before it can be determined whether it is a relatively mild transitionary period or the preamble for a pronounced recession.

-- Jack Krupansky

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