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Small Strength

September 15, 2010 – 5:40 pm

The retail sales report for August reported yesterday was stronger than expected though by any stretch of the imagination you could not say the consumer is back. He/she is still weak but a little stronger than the month before.

This morning a report on Industrial production for August came in line with expectations, up .2%. However, if you remove autos from the equation it was up .5%. You might think that was good news, and it is, but industrial production for July was up .6%. The auto industry cut production anticipating a slow down in sales. Capacity utilization for factories actually went up to 74.7% from 74.6%. This indicates that the broader industry is still gaining strength, that the cut in auto production did not overcome the increase in other areas.

The numbers for the last couple of weeks have been showing an economy that began to stabilize in August. This is in contrast to June and July’s numbers which showed a slow down, commonly referred to as a soft patch in our economic recovery.

As I have said before it is normal to have a soft spot when coming out of a recession. This recession was exceptionally deep and the recovery not very strong as construction activity is still dragging on our GDP growth. That won’t change any time soon. However, the economy is still growing. Many have been thinking and acting like we are not growing and that has made stock prices very attractive.

Good Trading
Steve Peasley

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