Falling productivity and capacity utilization signal the end of long-term bull market in word stock markets – a repeat of 1929-33
Fred Day
Mar. 6, 2007

Productivity is falling in every country. In addition, percentage of capacity utilization is falling in those countries. The scenario is worst in China, North America and Euro Zone. Japan and rest of Asia also look bad.

Whenever productivity and capacity utilization falls together, it signal deep deflation spreading like wild fire. In the past analytics have shown again and again that fall in capacity utilization is the first signal of slowdown. When wages also fall with it, it is the smoke of deflation.

Quantitative models that look at capacity utilization in steel and copper manufacturing is predicting for some time deep depression in world economies especially in India and China. United states and Euro Zone are headed for deep recessions. This model tracks the activities of two specific manufacturing activities.

The same was also seen just before 1929 crash of the stock market. The falling productivity and capacity utilization creates parabolic tops in stock markets. What that means is that the recovery in the stock market takes a very long time.

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