Food for Thought… are we at inflection point on productivity growth?
This article from the NY Times, “The Economy is getting hotter, is a Productivity Boom Next?” suggests that productivity depends just as much on demand as supply.
The chart in the linked NY Times article from a McKinsey Global Institute (“Solving the Productivity Puzzle”) shows productivity growth currently near the low levels of 1982 when the great bull market started! Productivity Growth had peaked sometime in 2004 and dropped ever since! I cannot copy it for you so just click on the link above to see for yourself!
This chart below is split into 4 periods starting from 1980, 1990, 2000 and 2010 measuring the US Non-Farm Business Sector Hourly Output from all Persons YoY from the Bureau of Labor Statistics (Red) and the S&P 500 Index (Black, Bloomberg). It also shows that when the market hits a low point after a major correction or bear market (1982) so does productivity growth and then they pick up together. If the article is right and productivity growth is about to pick up, then this Bull Market might still have some more to go! Unimaginable?
European Consumer confidence is finally positive after decades of negative changes! Of course the Bears will say, it only went over -0- during the Dot.Com bubble and the Property driven bubble around 2006 — rather a bubble indicator or a demand indicator?
Euro Area Consumer Confidence
Euro-Area Consumer Confidence (blue, lhs) vs. US Consumer Confidence (black, rhs)
The blue line is mostly in negative territory implying negative changes in confidence — A Bubble Indicator?
Anyway Food for Thought when most concentrate on the booming economy pushing up interest rates, inflation and a potential bear market, it may also contain economic efficiencies reflected in a positive productivity growth leading to higher margins! Bears, beware of those Animal Spirits!