Yesterday, we noted that the Fed seems to have declared the end of the recession based upon Industrial Production (Federal Reserve Declares Recession Over).

The folks over at Tableau Software took another swipe at the data, and found the answer is less clear cut then the Fed suggests.  A breakdown by sector is somewhat are far less conclusive than Industrial Production

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Sector Analysis of Industrial Production


Chart courtesy of Tableau Software

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Construction is the obvious laggard, with consumer goods 2nd to last . . .

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.

29 Responses to “Recession End Does Not Mean All Sectors Recover Equally”

  1. Mike in Nola says:

    Big assumption is “Recession End”. Other is the validity of comparing it to those in memory.

  2. morton2002 says:

    Here’s an interactive version of the same visualization: http://public.tableausoftware.com/views/G17IndustrialProduction_1/G17ProductionIndicators?:embed=yes&:toolbar=yes

  3. morton2002 says:

    Also to the poster, note that you can embed the interactive visualization instead of a static image, using the embed code available from the “Share” button. I’ll try to paste it here, but the blog platform may strip out the HTML:

    G17 Production Indicators Powered by Tableau

  4. Marcus Aurelius says:

    These are the same folks who swore there was no recession until we were a year and a quarter in, and the fact was no longer deniable. The recession is over? Good. I’m expecting the Fed to increase interest rates substantially. Wouldn’t want anymore bubbles forming.

  5. bsneath says:

    The first leg of a “W” looks a lot like a “v”.

  6. zell says:

    John B. Taylor gave me an education this morning. I have always thought that GDP was defined by the market value of goods and services produced by labor and property was GDP or some translation of that. Prof Taylor’s blog presented the formula of GDP=C +Inv + G+( eM-iM). Inv is “investing”. He presents 4 graphs to show that it was investing that created the jump in GDP. To me that indicates that the surge of investment starting in Q1-09 was responsible for the increase in GDP rather than the productive economy. It’s a new one to me- the inclusion of investing in gdp.

  7. cognos says:

    Uh… I thought a sequence of positive GDP growth (+5.7% in Q4) definatively ends the recession.

    Its looks like 3 Qs with this quarter coming in at 3-4%, and then another, another, etc.

    Some commenters seem to think.. “recession over” is the same thing as “high boom 1999-style growth”.

    That’s odd.

  8. allansmythe says:

    I like the grey reference bands using date constants for the recession periods. That’s a nice concept!

  9. cortezj29 says:

    The recession is over in terms of positive GDP growth. However, it is disinflationary measures such as aggregate declining wages, lack of job growth and markedly decreased home values that will prevent any TRUE recovery in 2010. ZIRP is still with us for a reason – incurring debt is being avoided by traditional borrowers and lenders are hesitant of undertaking any risks.

  10. cognos says:

    Looking back on 30-yrs of economic history… we have ZERO rogue “double dip” quarters once we’re in a recovery. The history of GDP is very smooth and moves in broad long cycles.

    The only 2 exceptions to this… are the small -0.1% dip due to the Sept 11th attacks and the double dip in the 80s due to Volker’s second round of rate hikes (>5%?) to kill off inflation.

    Here again… absent some “event” or large (>3%) increase in interest rates… positive 3-4-5% GDP recovery is highly likely each quarter. Combined with a modest amount of inflation (1-3%) this will quickly correct all debt imbalances, cause dramatic declines in loan losses, and push significant increases in employment. Just your garden variety ‘classic recovery’. Perhaps a little stronger.

  11. cortezj29 says:

    In response to :
    Marcus Aurelius Says:

    These are the same folks who swore there was no recession until we were a year and a quarter in, and the fact was no longer deniable. The recession is over? Good. I’m expecting the Fed to increase interest rates substantially. Wouldn’t want anymore bubbles forming.

    __________
    I think the gov’t introduced stimulus spending because the FED couldn’t induce another bubble after the housing crash. I can’t fathom where another bubble would even come from. Stocks – no, too many burnt in ’08. Housing – no, not for many years as forclosure cycle is still in effect. Wage growth – no, globalization of workforce will stymie wages. Anyone know? Otherwise, we are facing the Japanese scenario.

  12. cortezj29 says:

    in respose to Cognos:

    Here again… absent some “event” or large (>3%) increase in interest rates… positive 3-4-5% GDP recovery is highly likely each quarter. Combined with a modest amount of inflation (1-3%) this will quickly correct all debt imbalances, cause dramatic declines in loan losses, and push significant increases in employment. Just your garden variety ‘classic recovery’. Perhaps a little stronger.

    ________
    The problem with your “garden variety ‘classic recovery’” is the massive scale of debt in the economy is STRONGER than a modest inflation policy. Couple the debt with a workforce will make less money moving forward due to globalization, you have an economy that will churn for years to come.

  13. [...] UPDATE: in an interesting corroboration of my worries about consumer spending and real estate, Barry Ritholtz posts charts looking at individual segments of industrial productivity, and points out that currently the two weakest segments are construction and consumer spending. [...]

  14. forester_dude says:

    Recession over. MISSION ACCOMPLISHED! Move on. Nuttin’ to see…:-)

  15. cognos says:

    cortexj29 –

    If that is true — (massive scale of debt… is STRONGER than [recovery]) -

    THEN

    Why have we had 2 strong positive Qs? Why was the last one +5.7%? About 2/3rd through a 4% quarter… and leading indicators all point to continued positive Qs this year?

    Why did the “massive scale of debt” all of sudden stop mattering… Q1 2009… and why will it resume mattering? Doesnt make sense.

  16. cortezj29 says:

    cognos:

    GDP growth does not take into account debt in its measurement, just growth. Hence, why gov’t spending is GDP positive yet increases debt as well. My point is that the forces of debt deflation will increase faster than inflationary GDP growth, thus leaving the economy spinning it wheels at best.

  17. cognos says:

    Why are most of the smart hedge fund managers (many were short housing and subprime in 2006)… why are lots of them long financials now? (Paulson, Lampert, Einhorn, Mandel, Tepper, Soros, etc)

    Clearly they think “debt fears” are overblown (just as they were WAY overblown a year ago)… and the turning of the cycle will cause recovery, fast drops in credit losses, and big eps growth at C, WFC, BAC, etc.?

  18. Marcus Aurelius says:

    Some people can’t recognize bullshit even when they’ve just been fed a steaming hot plate of it.

  19. franklin411 says:

    People have been talking about “the debt” killing America since 1776. In fact, one of the earliest controversies in the history of the Republic was whether the Federal government would make good on the debts of the state governments. The national government absorbed the debt, to much shrieking by what we would call the deficit hawks of that day. They said it would kill America.

    Well we’re still here, aren’t we?

  20. torrie-amos says:

    why long financials, there white washing foreclosures, and paying more money on reserves, plus, so you got a guarantee, no accounting laws, and liquidity

  21. cognos says:

    Cortezj29 –

    But when? Why not last year? Why did it bounce? Why have we always heard these refrains, yet recovery happens? (and things look exactly the same)

    What you are stating is a “feeling”… as in, “I feel something isnt right.” But you cannot connect it with facts, theory, or numbers. It also doesnt make sense with the evidence (why recovery for 9 month or 18 months… and then your “feeling” comes true?)

    A “feeling” that doesnt connect to facts or evidence… is just a superstition. They’ve been around forever.

  22. Steve Barry says:

    Not only “recession over”, but the following accomplished:

    1. A depression is now impossible. – B. Obama
    2. We rescued the sytem. – B. Obama
    3. We are in a broad-based boom. – J. Cramer

  23. Mike in Nola says:

    Steve: Two people whose economic opinions I value equally highly.

  24. cognos says:

    Didnt Obama say — “a depression is now highly unlikely”. I think that’s the right quote.

    He also said something like, “now would be a good time to buy stocks” back in March 2009.

    So BO has a better track record than most economists quoted by BR regularly!

    Just saying…

  25. Rikky says:

    >>ositive 3-4-5% GDP recovery is highly likely each quarter

    at what cost. at what point is too much debt too much? we’ll be staring at $18-$20 trillion in US obligations this decade. things hum along….until they don’t. i for one won’t be in front of that steamroller if i can help it and i’m doing everything i can to affect that.

  26. cognos says:

    Rikky — we “owe” all that debt to ourselves! Right?

    If a I have $1m in savings… and I 500k to my friend for his new restaurant business. Then he owes me 500k. He has a restaurant, and I am charging him 10% interest. The money then gets put in the bank by his chef, contractor, and landlord… who each have “savings” and again the bank lends out their money.

    The US “net worth” (assets – debt) is around $100T. And we OWN much more in foreign assets… they we owe foreigners in credit.

    In terms of our “income” of $15T annually (and its growing $1T/yr)… and the level of interest rates (1-2-3%)… we dont have “too much debt”.

  27. Rikky says:

    cognos please don’t roll out the debt versus income/wealth argument. there’s a law of diminishing returns. you have to finance it and that means attracting buyers for it. what is foreigners stopped buying our debt tomorrow? disaster. second your debt interest payments continually increase taking money away from productive means. built into this ‘cake’ is an assumption that tax receipt and other ‘in’s’ will remain stable. your explanation is too simple.

  28. cognos says:

    Rikky –

    No. There is nothing to “fear” from the complexity. There is NOTHING to fear, if “foreigners stopped buying our debt”. This would correct alot of imbalances in the global economy and effects on financial market levels would be very minor.

    Take just the US govt. The US govt owes roughly $10T in outstanding debt. The average interest rate coupon on this debt is about 2.6%. So the govt pays $260B/yr in interest… against a budget of about $3T. Thus, the US govt is spending about 8% of its revenue on “debt service”.

    If anyone, a household… or a company… spent 8% of the budget on “debt service”. This is NOT a high level. And its important not to get carried away… when it looks a little higher when times are tough. The business cycle goes up and down. Markets go up and down. Nothing to make big decisions over.

    Even if the avg coupon rate doubled (which it wont) 16% of revenues on debt service… is not some crisis AND interest rates are likely to go up if /when the economy recovers. So increases in interest rates are likely to come with overall GDP and tax revenue growth.

  29. constantnormal says:

    @cognos — back out the contribution to the GDP from inventory restocking, and what does it look like? And as for inventory restocking being as valuable as consumption in supporting production, I note that consumption can continue so long as there are consumers with jobs to support it, while inventory restocking ends when the inventories are restocked.

    We’ll see about your “positive 3-4-5% GDP recovery” in the rest of this year’s quarters.

    There are not a lot of rabbits that the administration can pull out to keep this economy (apparently) hopping along. The one that comes most easily to mind is a wartime expansion. Invasion of Iran, anyone?