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Home Publications Blogs Beat the Press Post Finds Economic Momentum in Strange Places

Post Finds Economic Momentum in Strange Places

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Thursday, 16 December 2010 05:47

The headline of a Washington Post article told readers:

"Economic recovery gains momentum."

The report that provided the basis for this assertion was the Fed's release of data on industrial production for October. This report showed a rise in production of 0.4 percent in November, after a revised decline of 0.2 percent (previously reported as 0.0 percent) in October. However, this swing was entirely the result of a reversal in the output of utilities, which plunged in October and then jumped in November.

Fluctuation in utility output are overwhelmingly determined by weather conditions, not the state of the economy. Economists usually focus on manufacturing output which is more stable. This increased by 0.3 percent in November, the same as the rate now reported for October (revised down from 0.5 percent). This is a somewhat slower pace of growth than the 5.3 percent rate over the last year.

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...
written by kharris, December 17, 2010 9:01
"However, this swing was entirely the result of a reversal in the output of utilities, which plunged in October and then jumped in November."

Factory output, which excludes utilities, rose 0.3% in November. So it's looking like it wasn't just utilities, though I suppose you could show that the math works out that way.

Motor vehicle output fell 6% after rising in the prior two months, more or less the opposite of what happened with utilities. So you could make the argument that the highly volatile (though not weather-related) vehicle sector skewed IP lower, and that the good news is that everything outside of autos is doing well.

The reality is that some sectors other than utilities showed declines in October and then gains in November. The Washington Post may have been too simplistic, but so is the response posted here.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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