This is what a REAL output gap looks like..
Tuesday, March 8, 2011
If I told you today's January Industrial Production came in at 18.9 percent yoy, but -13.2 percent mom, what would you say? You'd probably say "seasonality" or "base effects" and have a look my attempt to squeeze all essential Industrial Production data into one graph:, which might also be called "yet another effort to profusely confuzzle my readers":) :
I know it looks (and probably is) confusing, but it is simple, really: On the left and right axes, I have respectively yearly and monthly growth rates. With yearly rates, I have the raw data as well as working-day adjusted figures (obviously, seasonality would be redundant here); with monthlies, I have the overall figure as well as the seasonality & working-day adjusted one (swda).
BTW, this brings to my mind my post after the December Industrial Production, somewhat sarcastically, had noted that what for an uncloseable output gap we had, eliciting "UKALA" (know-it-all) from an anonymous commenter. After today's print, I am not shy to make the same comment again:
It is an strong print overall, but you can read the details in the note by Citi economists.
Speaking of output gaps, here's what reader Rower32 had to say recently, as a comment to my short take on February inflation.
He is definitely right:)