I am a firm believer in the strength of the current US economic expansion. I also find it fairly obvious that the main part of the growth slip during the winter was triggered by unusually harsh weather conditions. When I stick to this view it is because that's what most economic indicators are telling us. Here are a few examples from last week:
- Industrial production rose by 0.4% in July on top of a similar increase in June. The year-on-year rate of increase is 5%. The level of production has never been higher.
- Car production rose by 10% in July (OK, there is something fishy about the seasonal adjustment). Nonetheless, the main point is that vehicle production has never been higher in the US than now. Detroit is rising from the ashes.
- Retail sales were flat in July (+0.1% ex-autos), which came as a disappointment to many. But the more important fact is that retail sales have reached the highest level ever, and are well above the pre-crisis level.
- Job openings (JOLTS) rose to the highest levels in 13 years in July, a testimony to the current strength of the labour market.
In 2012, Clint Eastwood did an outstanding TV commercial for Chrysler for the Super Bowl final. The theme was that it was half-time in America, that the country was frightened and that many were uncertain how to respond. But in his inimitable style, Eastwood's message was that "this country can’t be knocked out with one punch. We get right back up and when we do the world will hear the roar of our engines… it’s half-time in America and the second half is about to begin”.
Well, it seems he was right. You can see the clip here: It's half-time in America
Not everybody sees eye-to-eye with Eastwood, though, least of all Paul Krugman, perhaps the most well-known economist in the world. Last week, he wrote a comment in the New York Times entitled The Forever Slump. Krugman's view seems to be that "the crisis is by no means over. Recovery is far from complete, and the wrong policies could still turn economic weakness into a more or less permanent depression".
You can read his comment here: The Forever Slump
To be fair, Krugman does worry a lot about Europe in his post but he also seems ignorant of the economic progress made in the US. You don't have to take my word for it but try looking at the charts below.
