A lower capacity utilization of 81.9% can bullish for bonds but it confirms stagflation
Fred Day
Oct. 17, 2006

The capacity utilization came out at 81.9% - still above the critical 80% and way lower than inflationary 85%. It can be very bullish for long bonds because of the conformed slack in the economy and resultant lower pressure on the inflation.

However, when you combine this with increase of 0.6% in core PPI, the picture looks a little different. The analytic and quantitative models are saying in stagflation-plagued economy, the capacity utilization will slowly move downwards while commodity inflation will be relatively higher. That is exactly what we saw this morning from the data.

The net effect is that Fed cannot lower the rates while economy needs the rates to go down. The effect can be devastating for stocks. Bond and dollar probably will gain from the effect.

The industrial production slippage of 0.6% contradicts NY Empire State Index of 22.9 –how will stocks, bonds, gold and dollar behave?
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A lower capacity utilization of 81.9% can bullish for bonds but it confirms stagflation
Fred Day
The net effect is that Fed cannot lower the rates while economy needs the rates to go down. The effect can be devastating for stocks. Bond and dollar probably will gain from the effect.
READ MORE>>

Producer Price Index fell amazing 1.3% while core PPI shot up 0.6% - what does that mean for economy, dollar, bonds and stocks?
Sam Adelton
Again and again the central banks have failed to fight stagflation. They overshoot chasing the inflation and cause eventual depression in the economy. Stagflations when fought with fiscal means end up in deflation and depression.
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The stubborn capacity utilization manifests strength of economy – Dow 15000?
Paula Zubeda
Till it reaches 85, the Fed has no reason to raise rates. And if that pause happens in the middle of a capacity utilization above 80%, it is super-bullish.
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A little change in core PPI says the inflation part of the stagflation is under control but inverse direction of stocks and bonds manifests start of a massive recession
Mike Moran
Lack of measures to correct the underemployment driven recession is dragging the economy down further. If slight inflation is suddenly changed into deflation (as happened in Japan in the last deade), the economy can be depressed.
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A massive drop in Producer Price Index shows interesting correlation between inflation, eonomy, bonds, stocks and gold
Alan Hershey
The model shows the vulnerability of the stock market and the economy. The gold market interestingly has decoupled itself from dollar.
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