Skip to comments.The Glacial Economy Recovery – Capacity Utilization Falls & Still Below 80%
Posted on 03/16/2012 12:04:56 PM PDT by whitedog57
Fed Chairman Ben Bernanke uttered these words earlier this week: Despite some recent signs of improvement, the recovery has been frustratingly slow, constraining opportunities for profitable lending.
Today, The Fed released the industrial production and capacity utilization. Industrial production was unchanged in February after having risen 0.4 percent in January. Capacity utilization for total industry edged down to 78.7 percent, a rate 1.2 percentage points above its level from a year earlier but 1.6 percentage points below its long-run (19722011) average.
Traditionally, The Fed watches capacity utilization as measure of economic growth. 80% is considered the sweet spot or goal. If capacity utilization exceeds 80%, The Fed is tempted to raise the Fed Funds target rate to cool down economic growth. When capacity utilization is below 80%, The Fed is tempted to cut The Fed Funds rate to stimulate economic growth.
The yellow bars indicate that the capacity utilization bottomed out at the lowest point since President Carter. The difference is that capacity utilization rose to 80% under President Reagan, but President Obamas capacity utilization recovery has seemingly flat lined and cant break through to the 80% goal. And this is in spite of a historic monetary easing from The Federal Reserve with their Zero Interest Rate Policy and massive Treasury and Agency Mortgage-backed Securities purchases.
And the 10 year Treasury continues to climb.
Even the Congressional Budget Offices Real GDP forecast point to a downward trend in economic growth. This reminds me of Jeff Goldblums calling for the cycling down of the aliens signal in Independence Day.
The long term trend for real GDP is slow by historic standards. And with a significant number of baby boomers retiring, there will have to be serious modifications to entitlement programs.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
This is NOT an economic recovery. It is a path to total government control.
Maybe we should start movig people to the moon, then if the earth gets uppity we can shove rocks back at them at 18,000mph.
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