Bill King writes:

US industrial production for March declined 1.5% m/m and 12.8% y/y. This is the biggest y/y decline since the end of WWII. Q1industrial production collapsed 20% annualized. Since the recession ‘officially’ commenced in December 2007, industrial production is down 13.3% and factory production has declined 15.7%, which is also the largest decline since the end of WWII.

Q4 industrial production declined at a 12.7% annualized rate. So the past two quarters are showing a depression-like contraction in industrial production…Capacity Utilization fell to 69.3% in March. This is the lowest reading in the history of the series, which began in 1967.

The March industrial production data and February revision verifies our suspicious about too-good-to-be true auto production, industrial production and other economic data for February.

CPI fell 0.1% in March m/m and 0.4% y/y. This is the first annual decline since 1955.

Category: Data Analysis, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

116 Responses to “US Capacity Utilization”

  1. call me ahab says:

    like I keep saying “where is the good news”- there isn’t any.

  2. Chief Tomahawk says:

    Why obviously then, it must be time for the market to go higher because one “can’t fight The Fed/Treasury/China, etc.” and they’re going to be doing even more heavy lifting. Do I hear $10 of new debt to create each additional dollar of GDP???

  3. Mannwich says:

    Green shoots?

  4. YY says:

    This all reinforces the deflation thesis, even if there is a slow recovery in 12-18 months (it is possible) capacity utilization will remain too weak (in the interim and upto 24-26 months out) to translate into price leverage for companies’ profit.

    In plain language, those who are betting on a bull market are ignoring the incredible slack that exists everywhere around the world, and in every single category!

  5. Chief Tomahawk says:

    Larry K. just said “economic recovery” on CNBC. Sounds like he’s about to get goldilocks a wig for the recent headshaving she experienced….

  6. Onlooker from Troy says:

    There is just NO WAY I can stomach watching CNBC these days. It’s just SO aggravating to watch all the ignorant grasping for straws (green shoots?) that’s going on. I’d love for there to be a real fundamentally sound recovery going on, but it’s just not so. And the longer we the people and our govt try to ignore the facts and paper it over instead of grappling with the structural problems we’ve (they’ve) created and let develop, the longer we’ll be in this morass.


  7. drollere says:

    we are already below the capacity slack that was measured in 1982, but the long downward trend in capacity utilization since 1967 is very interesting … a result of the shift of GDP into the financial (services) sector?

  8. DL says:

    Yes, but bank earnings are fantastic! Dow 14K…!!

  9. DL says:

    Onlooker from Troy @ 11:43

    Maybe they’re all putting on short positions as they speak.

  10. harold hecuba says:

    no doubt a lot of this nonsense is short covering but something else seems very unnatural. the only sellers appear to be new shorts as well and every small pullback is bought. it has been the exact same pattern for a while. is everyone underinvested in stocks and piling in once again? the pain trade now seems to be higher before a drop to new lows. how much higher is a function of psychology. the gov, treasury and fed seem delusional but they understand the stock market is the world’s barometer and the lies and deceit will continue until it does not. it appears everyone is waiting for the decline to resume so they can sell it and buy back in the 600′s. here’s what may happen. how about the casino heads to the 200 day declines to a level where everyone seems to want to buy. i’ll say somewhere in the high 500′s low 600′s but it does not bounce and declines to the 300′s.

  11. dead hobo says:

    BR whined:

    US industrial production for March declined 1.5% m/m and 12.8% y/y. This is the biggest y/y decline since the end of WWII.

    Don’t be so old school. Nobody cares about that crap anymore. Big banks hit the bulls eye this quarter. They did it by making trading profits, accounting tricks, and profiting on accounting gains on their own debt that was heavily discounted because they had run their business into the ground. Do you actually expect these people to soil their hands on actually making things? What the hell is wrong with you? Smart people don’t do that crap. The wisest among us live on borrowed money and stick someone else with the bill. Or they service those who live that way. Ask Uncle Stupid. He lives to be of service to the greatest screw ups in history.

  12. franklin411 says:

    Consumer sentiment up
    Earnings coming in better than expected
    Employment stronger than expected

    And the Economic Recovery and Reinvestment Act funds haven’t even been injected into the economy yet.

    There’s plenty of life in this economy, but as the Bible says:

    Jerimiah 5:21
    21 Hear this, you foolish and senseless people,
    who have eyes but do not see,
    who have ears but do not hear

  13. dead hobo says:

    Wait a minute. If GM bought back it’s debt, which is probably trading at a 90% discount, it could book a profit on the gain. That’s It!! This is how we can save GM … Gain on Debt Redemption profits booked. I bet it’s a record quarter. Just think how that will make the market indexes jump! Happy days are here again.

  14. Steve Barry says:

    Two days ago, I posted how the mid-day Fast Money report caused GOOG to spike…now they just spiked MS, and the whole market. This show, if it should not be totally regulated, should at least go back to being on after the market closes exclusively.

  15. DL says:

    SB @ 12:50

    At some point, FAZ is going to pay off 10:1. At least for the person who can figure out where the top is in this rally.

  16. dead hobo says:

    DL Says:
    April 17th, 2009 at 12:59 pm

    SB @ 12:50

    At some point, FAZ is going to pay off 10:1. At least for the person who can figure out where the top is in this rally.

    I don’t thing the top matters at this time. If FAZ loses 50%, it goes from $9 to $4.50. It originally fell from the $40 – $100 range. In nominal terms, this would appear to be as close to a sure thing as anything on earth.

  17. leftback says:

    Barry, Kudlow called to say he meant to say that the THIRD derivative is positive.
    Green shoots and mustard seeds, baby !!

    @Franklin: You’re not Blankfein. You’re Abby Joseph Cohen! Go on, make that SPX 1500 call.

    Joe Baggadonuts just called a top, says stocks have reached their high for the year. Hmm….

    @DL: Patience will be rewarded, I figure. Stick with the Gartman rules on FAZ/SRS just like it was a stock or any kind of commodity. Nibble with stops until it gets rolling, then add on the pullbacks to support and don’t take the profits until we reach another sentiment extreme. The Death of Banking and Equities would work.

  18. call me ahab says:

    @ Steve Barry

    agreed- do they disclose their trading positions before they sound off – i.e. do they indicate whether they own the stock they are promoting?

  19. Mannwich says:

    This is looks like a replay of yesterday’s market action. Deja vu all over again.

  20. Onlooker from Troy says:

    call me ahab Says:
    April 17th, 2009 at 1:10 pm

    @ Steve Barry

    agreed- do they disclose their trading positions before they sound off – i.e. do they indicate whether they own the stock they are promoting?<<<

    You know that just doesn’t matter anymore. The crowd will rush from one thing to the next and pile in until it crumbles. We never learn. This rally will end up being a real study in market psychology before it’s over.

    Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay

  21. leftback says:

    Unemployment is really taking off, as Bruce has pointed out.

    If technical analysis means anything the rally will stop HERE.

  22. dead hobo says:

    Traders, Not Investors, Fueling This Stock Rally: NYSE Chief


    “It feels to me we’re in a trader’s market and not an investor’s market,” Niederauer said in a live interview from the exchange floor.

    Because of that, the rally likely is to run out of steam as low volume eventually comes back to the bite the market, he said.

    This looks like a classic circle jerk. Or, for polite company, let’s just call it a game of hot potato. Either way, there’s no sustainability and the longer it lasts the harder it will fall. I bet some left over oil thieves are trying to start a fire in equities like they did in oil. Who is dumb enough to fall for it twice?

  23. DL says:

    Now Barney Frank wants to backstop all the outstanding municipal bonds.

    It never ends.

  24. cjcpa says:

    Nibble with stops until it gets rolling

    How can you have tight stops on FAZ?
    anything ‘tight’ gets tripped.

    I guess it’s a rhetorical question.

  25. DL says:


    Tripped. Yes.

  26. Mannwich says:

    @DL: I will end someday…..very badly.

  27. batmando says:

    cjcpa -
    The same question has occurred to me in times past when the sages here have cautioned about tight stops.
    So, just how tight are your usual stops, guys and gals (lb, manny, Bruce, karen, et. al.)? or for special cases, like FAZ?

  28. Mannwich says:

    “It” will end. Careless Mannwich, careless!

  29. DL says:

    leftback Says: @ 1:29

    “If technical analysis means anything the rally will stop HERE”

    Or, for that matter, fundamental analysis.

  30. Mannwich says:

    Not tight enough right now, batmando. Sad to say.

  31. batmando says:

    @ Bruce
    oops, i forget, your in short term CDs

  32. batmando says:

    So I’ve gathered, Jeff.

  33. Pat Shuff says:

    There’s a bigger problem with the output gap theory. It’s “unsupported by statistics and history,” says Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago.

    Kasriel tested the correlation between the output gap and the core personal consumption expenditures price index, a measure touted by former Federal Reserve Chairman Alan Greenspan that made inflation look as low as possible.

    He found that the correlation coefficient was 0.45 out of a possible one. “Not bad,” he says, “except the sign in front of it was a minus.”

    In other words, the gap and inflation are negatively correlated.

  34. cjcpa says:

    we are not looking to make a difference in our financial life, just to juice the returns from .02% to a number over 1%. We may end up dragging our portfolio down to -2%, but don’t really care.

    Thus, we are in a 2x and 3x negative etf with no stops.
    our shorts are underwater, and we are not happy spending the day in wet shorts, but when not looking at the market, and after 4pm especially, it does not bother us much.

    If we were all in…
    well, we would not do that.

  35. leftback says:

    On days like today, Keynes’ remark about the market comes to mind:
    “the market can remain irrational longer than you can remain solvent”

  36. karen says:

    Pat, thank you for posting that bloomberg/baum link. fantastic reading. i’m going to read it a second time, i liked it so much…

  37. Mannwich says:

    Time to party like it’s 2007, it seems. Party on!

  38. Steve Barry says:

    The institution that seems to be driving everything is in firm control here…it is daunting to go against them…two are…Mike Morgan and Reggie Middleton.

  39. DL says:

    leftback @ 2:04

    How about the market being irrational longer than the BANKS can stay solvent…?

  40. leftback says:

    An interesting Macro Man today (thanks, Karen), especially to us, as we have lately been long the EWT (exited) and we have used the EUR:JPY as an indicator of the likely trajectory of equities (as does Gartman).

  41. DL says:

    The S&P hasn’t had three consecutive down days since March 9th.

  42. leftback says:

    @DL: if you watched Chris Whalen this morning on “Blooming With Betty”, they are not solvent….

    This 870-875 area is an absolutely MASSIVE technical level. I know AT commented that if this breaks to the upside we go all the way to 950 or higher. If it does break, I can tell you that LB will not be standing in Tiananmen Square in front of the tanks.

  43. DL says:

    There is a way that I could single handedly bring an end to this rally.

    All that I would have to do is load up on call options.

    Stock markets all over the world would immediately turn tail and head lower.

  44. call me ahab says:

    what are the chances for a sell off the last hour? anyone want to take a stab at that one

  45. karen says:

    50-50, lol.

  46. DL says:

    4:1 against a selloff.

    But maybe Monday.

  47. karen says:

    sorry, that wasn’t funny, or serious. i take it back…

  48. call me ahab says:

    I mean it can’t be one up day after another- can it?

  49. leftback says:

    DL said: “Now Barney Frank wants to backstop all the outstanding municipal bonds.”

    It figures that Bwarney would fancy another backstop.

  50. Mannwich says:

    It appears that it can. Up 6 weeks in a row now. Ho-hum. Just another day in fantasy island. Where is Herve when you need him?

  51. call me ahab says:

    @ DL-

    why Monday? the only thing coming out on Monday are leading inidcators

  52. Mannwich says:

    @ahab: Why not? Why does it go up day after day after day no matter what? There are no real reasons for anything anymore.

  53. Mannwich says:

    Like I said, this a weird replay of yesterday. Slow, steady march upward in the afternoon.

  54. leftback says:

    The plane, boss… the plane!!!

  55. dead hobo says:

    I’ve capitulated. It’s will never stop going up. This time is different. The sheep got this one right. Buy at the bottom now. You have nothing to lose except being poor.

  56. Mannwich says:

    Remember how that show ended every night, back to reality. We’re clearly not there yet.

  57. call me ahab says:

    you know- I lost a few bucks today if thius doesn’t turn around in the last hour- have been all cash but went for some inverse ETFs today (and Wednesday)

  58. DL says:

    Ahab @ 2:38

    I couldn’t have said it better than Mannwich (@ 2:40)

  59. call me ahab says:

    the other thing that happens- you start to doubt yourself- it’s like a real mind fuck- reminiscent when I went all cash in 2007 but the market continued onward to 14,000- I was incredulous.

  60. DL says:

    dead hobo @ 2:43

    I figure, at its present rate of ascent, the Dow should hit 14K by July.

  61. leftback says:

    Patience. Remember last spring? Remember the summer of 2007? Remember 2000?
    When they brought Rosetta Stone to market I was thinking about….

    What is extremely odd is the breakdown of the inverse US$:SPX relationship this week.

  62. Mannwich says:

    I can be patient. I’m irritated because things aren’t getting better but I can be patient.

    On another note anecdotally, I went out for Happy Hour last night and although Stella’s Roofdeck in Uptown (which is actually below downtown geographically, so that always confuses me, but I digress) was packed from 7-9 p.m. or so, likely because we North Polers flock to the outdoors at any hint of good weather). I then went to two other popular bars/restaurants afterwards, and they were as dead as I’ve ever seen them at these peak hours on a Thursday night. Perhaps everyone was at Stella’s but it just seemed dead all around in that neighborhood such a nice Thursday night out.

  63. karen says:

    as far as the $usd and $spx… the old rule was a strong dollar meant a strong economy… got me into a lot red as the dollar kept falling and the spx kept going up in 2007…

  64. leftback says:

    The 10-year is closing on 3.00 again. In the past, each close approach to that level has preceded a stampede back into the Treasury complex and a sell-off of stocks and high yield bonds.

  65. dead hobo says:

    Mannwich Says:
    April 17th, 2009 at 2:56 pm

    I then went to two other popular bars/restaurants afterwards, and they were as dead as I’ve ever seen them at these peak hours on a Thursday night. Perhaps everyone was at Stella’s but it just seemed dead all around in that neighborhood such a nice Thursday night out.

    I think I’m going to start drinking now. I’m just happy happy happy to see this fine market reach for the stars.

  66. leftback says:

    Don’t get angry. Just read Mish, he’s usually there a few hours before everyone else…

  67. DL says:

    Mannwich @ 2:56

    Trying to apply the Peter Lynch method?

    (He wrote a book called “One up on Wall Street”, or maybe it was “Up Yours, Wallstreet”, I can’t remember)

  68. Mannwich says:

    @leftback: Am reading Mish now. I’m one of those “small businesses” who is struggling mightily.

    Time to hit the gym and then out for Happy Hour again. 75 and gorgeous here today. Heading to Britt’s pub downtown. They have a great roofdeck with lawn bowling. Think I’ll bowl myself down one of the greens after a few pints.

  69. DL says:

    karen @ 3:01

    And what did a strong yen mean when IT rallied in Q4…?

  70. dead hobo says:

    I think it just as simple as the former oil idiots moving into stocks. It will run until it breaks. Just another ponzi bubble in the making. Some poor dumbass is going to be left holding a very expensive bag. A lot of traders will get caught up in the euphoria and buy too late and sell too late. The shorts will make out pretty well when it bursts. Not being psychic, I’m going to wait it out.

  71. karen says:

    DL, which year for that Q4 rally?

  72. call me ahab says:

    I thought I did wait it out

  73. Mannwich says:

    So did, ahab. Am looking at this as an opportunity to liquidate some long mutual funds in my retirement that I’ve been wanting to dump. That’s how I’m looking at this, as an opportunity.

  74. dead hobo says:

    call me ahab Says:
    April 17th, 2009 at 3:14 pm

    I thought I did wait it out

    No, the S&P is only 870 or so. It needs to go to 1870 or so before this thing starts to look a little crazy. This should be late 3rd quarter.

  75. leftback says:

    hobo: Remember when oil went from $125 to $147? That was Goldman killing some small hedgers. Hint…

  76. DL says:

    Karen @ 3:11

    Q4 of 2008.

    (My point was just that the yen didn’t rally because of a strong economy).

  77. call me ahab says:

    1870! Surely you jest

  78. dead hobo says:

    leftback Says:
    April 17th, 2009 at 3:18 pm

    hobo: Remember when oil went from $125 to $147? That was Goldman killing some small hedgers. Hint…

    No memos yet.

  79. Mannwich says:

    @dead hobo: We could have 10% unemployment by then. At this rate, unemployment will hit 15%, and the S&P will top out at 2,000. Hurray for unemployed day traders with nothing better do with their time! Wait, do I count as one of those if my business is no longer making any profits?

  80. dead hobo says:

    Mannwich Says:
    April 17th, 2009 at 3:19 pm

    Wait, do I count as one of those if my business is no longer making any profits?

    Issue some debt. Then let everyone know you’re broke and waiting for government money. Then offer to buy the debt back at 25 cents on the dollar. You just booked a profit like C. It’s gain on debt profits exceeded total net. GM needs to do this to save itself.

  81. call me ahab says:

    profits? we don’t need no stinking profits- so bourgeois

  82. DL says:

    Mannwich @ 3:19

    RU TBTF…?

  83. Mannwich says:

    @dh: That barely used WFC business credit card is looking mighty tasty. Think of the goodies I could buy with that and then apply for my bailout?

  84. leftback says:

    “Issue some debt. Then let everyone know you’re broke and waiting for government money. Then offer to buy the debt back at 25 cents on the dollar. You just booked a profit like C. It’s gain on debt profits exceeded total net. GM needs to do this to save itself.”

    Piker. Go the whole hog. Divide the debt into tranches, send hookers to Moody’s and get the CDOs and CDO squared rated AAA. Don’t forget to leverage the whole thing up 30:1 and sell it off to pension funds, and finally do an IPO and issue some common and preferred in MannyCorp. Then use some of the proceeds to buy CDS on your own debt, but use most of it to buy property on a warm island and a private jet. Invest enough in Ginnie Maes to live on and wait for the whole thing to blow up. When interview, express surprise.

  85. DL says:

    Mannwich @ 3:26

    You should have borrowed a couple hundred K $$ when the times were good, then squirreled it away in the Caymans.

  86. Mannwich says:

    Great plan, leftback & dead hobo. I’m on it. Like Bernanke, Summers and Geithner, I’ll just call it “financial innovation”. Do you think the feds will buy it when they take me away in handcuffs?

  87. Mannwich says:

    @DL: Well, I still have some rather large credit lines that haven’t been tapped. Is it too late for that now? I would think not.

  88. call me ahab says:

    the amount of earnings being announced next week is staggering- companies from all industries- that will be the “tale of the tape”

  89. leftback says:

    Resistance at SPX 875 was observed. Take heart, those of a bearish disposition.

  90. call me ahab says:

    bit of a turn around- next week full of all sorts of compnay earnings- BofA, CAT, Apple, Texas Instruments, etc- should be interesting

    @ leftback

    I am not a TA aficionado- outside of observing overbought and oversold situations- what is the significance of 875?

  91. franklin411 says:

    People get out and live a little. Spend money, go to the park, and see the green shoots of spring. I’m looking out my window right now at the fields and mountains green as all Ireland with new growth. It matches the Obama Recovery quite nicely! =)

  92. call me ahab says:


    so . . . just look out my window like you- or actually go outside? By the way, I’ve been to Ireland- I wasn’t impressed- Dublin- not much to look at. Berlin is a much more impressive city, so is Budapest. By the way- about Obama- prepared to be disappointed- politicians are the same people you couldn’t stand in high school- they really don’t care – regardless of the tingling sensation they may cause to run up your leg (a la Chris Matthews)

  93. Transor Z says:


    Seriously, does this guy or does this guy not embody the Treasury strategy?

  94. DL says:

    Ahab @ 4:09

    875 was a point of some resistance on 1/28/09 and 2/9/09.

    That doesn’t mean that the S&P can’t get through that level. If the market manipulators can manage to push the market above that level, we could see more capitulation from the bears.

  95. Transor Z says:

    “Gotta getcha money” spot by Matthew Lesko. Different target demographic.

  96. call me ahab says:

    Thanks DL- I know you TA guys are all about the resistance levels- but I just don’t get it. What happens @ 875 that keeps the market from going up (glad it didn’t though)- do shorts jump in a that level? Do longs start selling at that level?

  97. cjcpa says:

    you draw a line across the peaks and then you imagine that line as a physical barrier.
    when the stock price or index value goes up against that line/barrier and is repelled, it reinforces the idea that the line is a legitimate barrier that the stock/index cannot cross.

    that is my take of “resistance”. but I’m just another observer.

    If you like 80′s movies, JAFO.


  98. cjcpa says:

    yeah, well is it something that is a real barrier?
    or is it that people consider it a barrier, and therefore make it so?

    there is debate on this issue, I can say that.

  99. DL says:

    Ahab @ 4:09

    Read this (if you can access it). It’s Michael Kahn’s latest TA missive on the market

  100. hopeImwrong says:

    TA identifies potential levels of resistance and support. At a high level, it is about people getting out even. Or buying a pullback to add to a position (trying to catch a bottom when it is re-tested). For example, if they bought at the highs before (875), and suffered through all the pain of holding to be even at this point, some may sell to get out even. This creates selling pressure. At the lowest level, it’s about TA types watching those levels and acting on them producing a self fulfilling prophesy.