The markets are increasingly on edge regarding the state of the economy. Like the situation with the mono-line insurers, rather than the current day to day shifts in sentiment, a lot of investors would probably prefer some finality to the situation whether it be good or bad.
Unfortunately, this morning's Industrial Production and Capacity Utilization reports for January provided little in the way of clarity for the markets. While both reports were by no means indicative of economic strength, they are not indicative of recessions either. On a year/year basis, Industrial Production rose 2.3%. Looking back at the five prior recessions since 1973, Industrial Production was higher at the start of two, lower at the start of two and at similar levels at the start of one. Additionally, in both the mid 1980s and 1990s, Industrial Production fell below current levels, but the economy skated by without a recession. Capacity Utilization provides just as cloudy of a picture. For the five recessions since 1973, it was higher at the start of three and lower when the other two started.
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