Overall, the economic news this summer has been pretty good. A bit of cloudiness appeared yesterday with the Federal Reserve''s report on July industrial production. The short story, from Bloomberg:
U.S. industrial production rose by a less-than-expected 0.1 percent in July...
The increase in output at factories, mines and utilities followed a 0.8 percent increase in June, which was the less than originally reported, the central bank said today in Washington. The proportion of industrial capacity in use fell to 79.7 percent from 79.8 percent.
Mark Thoma combines the report with news on July housing starts and notes some "hints of a slowdown." But Mark also concludes
... the .5 percent increase in the CPI including food and energy, the headline figure, and the robust growth of new building permits in housing will not dissuade the Fed from further rate increases.
That will not engender a bullish attitude in everyone. And the New York Times this morning opines that the economy shows signs of strain from oil prices in a story it supplements with this picture:
The Capital Spectator sees echoes of this in the bond market:
The bond market prefers to ignore the energy component when it comes to inflation. To the extent that energy's the source of the inflationary pressures haunting the CPI, that's not a threat for the fixed-income set. And not without reason, say some traders of debt. High oil prices may stoke inflation fears, but the same elevated prices in crude also raise the specter of an economic slowdown. Which side has the upper hand at the moment? Once again, the recession-is-coming crowd does.
Still, not all is woe. Again from the Bloomberg article:
Business equipment production, which includes transportation and information processing equipment, rose 1.3 percent in July, the eighth consecutive month of increases, after gaining 0.2 percent. Production of defense and space equipment rose 1.5 percent.
Other recent reports provide evidence that manufacturing, which makes up about 13 percent of the economy, is gaining momentum. Corporate investment is picking up again after swollen inventories earlier in the year prompted companies to lay off workers.
Among other reports of strengthening manufacturing, the Fed reported yesterday that manufacturing in New York state expanded for a third consecutive month in August, as orders surged to 33.8, a high for the year, from 19.2 in July.
The Institute for Supply Management on Aug. 1 reported that manufacturing nationwide expanded in July at its fastest pace this year and that orders also surged. The Commerce Department reported the previous week that orders for durable goods unexpectedly increased in June after rising the previous month by the most since July 2002, while inventories of durable goods fell 0.3 percent in June.
For now, I remain cautiously ... shoot, I don't even know. It seems we keep going down this road of phases where the economy is poised for a real take-off, only to be whacked again by energy-price developments. I suppose to the truth is that I am cautiously optimistic, but for the moment I'd emphasize the "cautiously."
UPDATE: If you are tempted to look at indexes of future economic activity to help sort out your own forecast of where the economy is headed, Mark Thoma has just the post for you.