Prof. Hamilton on Industrial Production
James Hamilton has an interesting post on industrial production.
[T]he Federal Reserve Board’s index of industrial production fell one-half percent in January. That by itself is not that unusual. What makes it noteworthy is that this Fed index has been languishing for a while, and is now below its value of six months ago. That, too, can sometimes be benign. We saw a 6-month low in September 2005 after Hurricane Katrina, and in the anemic recovery of 2003. But a 6-month-decline in the index is something that is often associated with the early stages of an economic recession.
As I’ve also been saying on these earlier occasions, if the housing downturn gets no worse, that by itself should not be enough to cause a recession. Detroit’s woes are also not enough by themselves to cause a recession. But what about the two together?
Here’s what I think:
I have to agree.