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From X, on Thursday:

This is beyond ridiculous: industrial production and capacity utilization saw another massive downward revision, and Jul’s print still came in negative M/M – manufacturing is in recession:

 

Note: Dr. Antoni has used industrial production, capacity utilization in the above graph, rather than manufacturing.

This struck me as an odd characterization, so I plotted the data over the same period (using manufacturing instead of industrial classification).

Figure 1: Manufacturing production (blue, left scale), employment (tan, left scale), aggregate hours (green, left scale), and real valued added (red), all in logs, 2007M12=0, and capacity utilization in manufacturing, in % (black, right scale). NBER defined peak-to-trough recession dates shaded gray. Note: 2007M12 is NBER’s business cycle peak. Source: Federal Reserve, BLS, BEA via FRED, NBER. 

The figure highlights two points: (1) manufacturing production (Fed index) and value added differ, since the former is gross, the latter net; (2) employment and hours are problematic measures for indicators since productivity in manufacturing is higher than the overall economy.

While capacity utilization has declined, it is still higher than the level on the eve of the pandemic.

It’s hard to see what’s going on more recently, so I present the corresponding post-pandemic data in Figure 2:

Figure 2: Manufacturing production (blue, left scale), employment (tan, left scale), aggregate hours (green, left scale), and real valued added (red), all in logs, 2021M07=0, and capacity utilization in manufacturing, in % (black, right scale). Source: Federal Reserve, BLS, BEA via FRED. 

We don’t have value added for Q2, but we do have manufacturing production and employment through July. These preliminary figures indicate slowing, but not clear to me they’re into recession territory (whatever a sectoral recession is).

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