An Ominous Sign From the Philly Fed
Written by
Every month the Philadelphia Fed releases the State Coincident Indexes measuring the current economic activity for each of the 50 states. This morning’s release (covering December) showed the diffusion index — a compilation of each individual state’s performance drop to -74 after peaking at -22 in November. (Levels below 0 reflect contracting conditions.) The Philly Fed said, “In the past month, the indexes increased in three states (Nevada, Oklahoma and Oregon), decreased in 40, and remained unchanged in seven (California, Idaho, Kentucky, Michigan, Texas, Utah and Virginia).” This single result cannot be taken as the start of a trend, of course, but it will surely give some ammo to the double-dip recession proponents. The chart below plots the 50-state diffusion index against previous recessions.
Double dip is consistent with the sugar high meme of unsustainable, not to say fake, growth, engendered by blasting the economy with a stimulus firehose. The pessimism that seems to be creeping back may do the rest.