Industry bounce soothes but does not cure

August 16, 2011

Phew. Industrial production rose 0.9% in July, the fastest in seven months. For the moment, that appeared to forestall fears that another U.S. recession  might be imminent, even if stocks were down on worries about weak economic growth in Germany. Harm Bandholz at Unicredit saw the figures as a bright spot:

Today’s report, in combination with the recent improvements in initial jobless claims and retail sales, corroborates our view that GDP growth in the second half of the year is likely to accelerate to (a still low) 2%-2¼% from less than 1% in the first half.

Economists at Credit Suisse were less sanguine:

The July industrial production performance is not consistent with recession.  But industrial production tells us where we are, not where we are going.

There are indications that the future may not be so bright, particularly given the uncertainty that reigned at the end of July and the start of August, as the U.S. flirted with default amid a heated political battle over the debt ceiling. The New York Fed’s factory index for August showed a third month of contraction, while the Philly Fed’s measure of Mid-Atlantic manufacturing, due out on Thursday, is forecast to have held steady at very low levels.

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