Production Doldrums

On April 15th, the Federal Reserve released its March data on industrial production. “The capacity utilization rate for total industry fell further to 69.3 percent, a historical low”

In a 4/15/09 WSJ “Ahead of the Tape” column, Mark Gongloff notes a Congressional Budget Office estimate that “GDP growth could be 7% below potential for the next two years” and that it is “the deepest underperformance since the 1981-82 recession.” The investment firm Goldman Sachs estimates that “getting GDP back to trend will require unusually fast catch-up growth – 4.75% per year in order to close the output gap by 2015, or 3.75% per year to close it in a decade.”

Gongloff concluded with a comment from Goldman Sachs that “such speedy growth closed the wide output gap of the early 1980s … and it didn’t create inflation.”

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