Monday, November 17, 2014

Industrial Production for Consumer Durable Goods: Growth Is Slowing

The following chart shows the 3-month moving average of the natural log of the industrial production for consumer durable goods.

Click to enlarge.

When using natural logs, constant exponential growth is seen as a straight line. I have included a parabolic trend in red with a January of 2011 starting point (seemed like a stable starting point).

So what does this mean?

1. If the parabola curves upward, growth is accelerating.
2. If the parabola is straight, growth is constant.
3. If the parabola curves downward, growth is decelerating.

If you look closely at the chart, you will see that the parabola curves downward. Growth is therefore decelerating. If recent history is a guide, then this deceleration could easily turn into something far worse and with little advance warning.

Click to enlarge.

It is my ongoing opinion that there is a high probability that we will enter the next recession while still stuck in ZIRP. Won't that be a party. Not.

Source Data:
St. Louis Fed: Custom Chart

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