Things are so bad that the scales don´t register when it gets worse!

This morning, we witnessed the release of industrial production. A typical headline:

U.S. industries pumped out more goods in April to meet growing demand from consumers and businesses, another sign the economy is gaining momentum.

The so-called “momentum”, however, is just the “recovery” from a slump.

The chart illustrates, comparing industrial production in 2014 – 2018 to what transpired around the recessions of 1990/91 and 2001.

Note that this time around, the fall in industrial production was bigger and more protracted; nevertheless, there was no recession call. Why is that? One conjecture is that things were already so bad that just getting a little worse did not raise any flags.

The upswing, that takes you back to where you were almost four years ago is dubbed “gaining momentum”!

Just as happened yesterday when retail sale came out, the immediate reaction was a rise in the 10-year yield. Maybe tricked by the “gaining momentum” story, but that will not sustain the rise in yields.


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