Tuesday, April 16, 2013

Unmistakable signs of growth and recovery

March data released today for industrial production and housing starts show unmistakable signs of growth and recovery. Economic growth in the first quarter of this year is almost certain to be much stronger than the anemic growth of the fourth quarter.


Here's a great example of how a sector of the U.S. economy that suffered a devastating blow during the Great Recession has staged a "V-shaped recovery." Industrial production has expanded by 19% since its low of mid-2009, and is only 1.4% shy of an all-time high. Production is up 3.5% in the past year, and it rose at an impressive 5.7% annualized rate in the first quarter of this year.  


The chart above is a reminder of just how much better the U.S. economy is performing than the Eurozone economy. The Eurozone has been in a recession for almost two years, burdened by the struggling PIIGS economies and the threat of sovereign debt defaults, but the U.S. has shrugged off the problems across the pond and continued to forge ahead.



Pessimists focus on the fact that housing starts today are at levels that marked recessions in the past, but optimists focus (correctly) on the huge improvement on the margin. Residential construction has only recovered about half of what it lost in the Great Recession, but gains in the past two years have been nothing short of spectacular. Starts are up 92% since the end of 2010, they have jumped 49% since the end of 2011, and in the year ended March, they are up 48%. These are rather extraordinary statistics. The most beaten-up sector of the economy is coming back to life by leaps and bounds. Why are there still so many long faces out there?

12 comments:

Gloeschi said...

Long faces, so you can tell us the "truth"

William said...
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sgt.red.blue.red said...
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sgt.red.blue.red said...

No long face here.

The mainstay of my portfolio, Berkshire Hathaway notched a new high today, on above average volume. So much for the gold/Boston induced selloff.

BTW, Recently, Berkshire became the third largest market cap S&P company, behind only Apple and Exxon. How much longer before Berkshire passes AAPL and XOM?

Gloeschi said...

I am confused. I thought I had to buy Apple?

Benjamin said...

My face is somewhat long as I think this recovery has taken far too long, and that due to excessive timidity on the part of the Fed.

Real people were thrown out of work, or had their small businesses suffer, for years on end. And 99 percent of those people were in no way responsible for the financial collapse.

And Stockman was right about one thing: We are building up debt without a way to cure it. Our two political parties love spending, but not taxing.

So, we may run into a Japan situation: heavy federal deficits and monetary asphyxiation. It may be Japan lite.

There is hope---even Kudlow has embraced Market Monetarism. I think Scott Grannis will soon.

Welcome aboard, I say.

BTW, I am not a robot, but who can figure out what these letters are, the numbers are often dimly lit....




William McKibbin said...

I am no longer confident that the US can grow itself out of the economic crisis -- something significant will be required as a sacrifice -- I'm not sure what that may be -- I suppose the US could sell Alaska or Hawaii (or both) to foreign investors -- perhaps an agreement to fight a war as a proxy for a foreign entity -- but something big is going to be required -- when I say big, I am thinking of a deal along the order of $10-15 trillion -- but again, Federalism will only be saved via a external "deal" of some kind -- the same goes for Japan -- without a deal, Federalism as we know it is doomed...

steve said...

" perhaps an agreement to fight a war as a proxy for a foreign entity". c'mon bill, really? there will be no "big deal" and the US will muddle its way forward because of policy embraced post 911. that is the day the US as we knew it ended. Bush turned into a liberal and an unpopular one at that! opened the floodgates of "progressive" govt and Voila! you see the result

William McKibbin said...

Hi Steve, I tend to agree with you about the prospects for a deal -- as for the US "muddling through," I am less and less confident that Federalism can survive navigating down such a treacherous path -- sorry, but I do not see how the US can "muddle" forward without invoking some kind of horror upon the American people along the way -- by "horror," I mean a disorderly economic event that collects up >$10-15 trillion instantly -- and again, I do not see how slow growth can cover that ticket...

Charles said...

The economy is in great shape. There's just that little problem of the unemployed, the underemployed, the disabled and those who gave up and retired early without a secure retirement. The economy is growing fast enough to keep up with labor force growth plus a small kicker from the recovery in residential housing. But the Obama administration has put us firmly on a slow growth, high unemployment path.

Hans said...

Why the high unemployment?

Why still FedZero ?

Why still QES ?

My face is so long, I look like Jay Leno!

Mark Gerber said...

Bill, how do you come up with 10 to 15 trillion? Based on flat medical costs, demogaphics, and actuarial tables, it looks like the USA will need to come up with around $30 Trillion to get through the next 20 years without having the national debt exceed 250% of GDP.