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Good News, Sorta: Things Haven’t Gotten Worse

If you’re a glass-half-full kind of person, the latest economic data should be a nice warm chocolate-chip cookie to dunk in your milk.

With a mixed picture thus far this winter, we’re keeping an eye on economic indicators that can serve as harbinger of recession. Yesterday, we received some mildly encouraging numbers from the industrial production report released by the Federal Reserve.

In January, industrial production was up 0.9 percent from December, on the strength of a 0.5 percent gain in manufacturing. Much of the rest of the increase was due to a spike in utilities, likely a weather-related phenomenon that wouldn’t reflect the overall economic trajectory.

Over the last 12 months, manufacturing is up 1.2 percent, which our senior research fellow Bob Hughes, author of Business Conditions Monthly, calls a slow rate of growth – “but at least it’s growing,” he said.

Initial claims for unemployment, meanwhile, fell for the second straight week. “Continued gains in the labor market are very important for the overall economic outlook,” Hughes said. “We saw claims drifting higher for a few weeks, so it’s good to see that trend reverse.”

But there were a few economic signs that weren’t quite as upbeat. Housing starts were down in January, although new permits were down by less. Starts can be affected by weather, but permits, not as much, Hughes said. After a nice recovery following the Great Recession, housing starts have tailed off over the last year, he said.

And manufacturing surveys released this week by the New York and Philly Fed skewed negative, if not as negative as they’d been in recent months.

On balance, Hughes said, the data remain mixed.

“The fact that it’s not getting worse is a good sign. But we’re not seeing a return to more robust growth yet,” Hughes said.

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