More evidence that inventories reached an unsustainable low level and that production needs to be restarted to replenish inventories. We will need to watch final sales carefully, particularly consumer spending, to assess whether this is only an inventory bounce.
The April Chicago Business Barometer™ recovered dramatically after the third test of the 20 year low value. If this were an average recession, it would end four months after the low point in the Barometer, suggesting an end of the recession in August 2009. A more conservative rule would draw an analogy to the 1981-82 recession, since this is not working out to be an average recession. Using that rule, the end of this re-cession would be projected to be 9 months after the lowest value of the Chicago Busi-ness Barometer. With March as our best current estimate of that minimum, the recession is projected to end in December 2009.
The April Chicago Business Barometer continued to reinforce the observation that this recession is not only deep, but also is broadly based. This month’s issue of the CHICAGO Report is marked by the continued accelerated rate of decline in the Prices Paid index… to the lowest rate in 60 years!. On the other hand, the economy was looking up as PRODUCTION, NEW ORDERS, and ORDER BACKLOGS each continue to fall, but at a slower rate than in March. The EMPLOYMENT situation continues grim, but even there, the rate of decline moderated, reaching the highest index value in 2009.
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