Sunday, October 19, 2008

Rockin' Like a Hurricane

U.S. factory production was very low in September. It is important to recall that two major storms hit the U.S. in that month -- Gustav and Hanna -- and that there was a strike at Boeing. Significant events like these are unlikely to occur in 2008 Q4, 2009 Q1, or 2009 Q2. Furthermore, the economy quickly rebounds from these events.

Thus, we should be careful not to extrapolate the rate of economic growth measured through September 2008 into the future. We should also be careful to evaluate economic growth measured FROM September 2008 with the understanding that some "rebound" is to be expected as factories clean up after a hurricane or strike.

This story suggests that most of the measured drop August-Sept in industrial production should be attributed to the hurricanes and the strike.

2 comments:

ChipsO said...

Casey,

I really appreciate your contrarian point of view on this whole credit mess. I'm hoping you can answer a question for me. You've been arguing that the effects of the credit crunch on main street will not be as dire as most people believe. But I'm wondering what data would convince you that the credit IS actually having a major/dire effect on the non-financial segments of the economy. What do you think? What indicators should we be looking for?

Thanks,

Chris

Don said...

"Thus, we should be careful not to extrapolate the rate of economic growth measured through September 2008 into the future."

Given all that has happened, and the uncertainty going forward, wouldn't this be a wise move in any case?

Don the libertarian Democrat