There are two ways that one can view the suddenly hollow U.S. economic recovery. From the vantage point of history, we'd have to say that it is normal for the economy to send out mixed signals during a period of transition from contraction to expansion. After all, if every economic report proclaimed good news, we'd be growing at a six percent rate instead of one. That view remains reflected in our Ball State forecast, which continues to be optimistic about the economy through year's end.

But it is one thing to study the history of recessions, and quite another to actually live through one. Those of us who foretell the economic future see a threat in almost every development, and when you're flying as close to the ground as the U.S. economy appears to be, it doesn't take too much to shoot you down. But while the business media chases headlines about corporate scandals and Iraqi invasions, forecasters are worried about much more ordinary things. Such as who's going to pick up the slack in the economy when consumer spending peters out. 

The fragility of the recovery was underscored in the August report on Industrial Productionin the national economy. The 0.1 percent decline in the manufacturing component of the overall index broke a seven-month long string of consecutive increases in factory output nationwide. Yet, were it not for the countering influence of motor vehicle manufacturing production, the streak could easily be said to have been snapped in July.

In a sense, motor vehicle manufacturing, driven by continued strong consumer spending on cars and trucks, is living on another planet than the rest of us. Even with its 1.4 percent contraction during August, levels of production in the industry are a full 12 percent ahead of what was experienced at this same time last year. In contrast, the overall level of manufacturing output in August 2002 was a scant 0.6 percent ahead of its year-ago mark.

A rise in vehicle output in July helped mask weakness elsewhere in durable goods production and keep the overall index in the black in last month's report. In a reverse swing, however, the August decline in vehicle production overcame a more positive performance elsewhere in durable goods to send the overall index down.

Even with the August weakness, the performance of manufacturing thus far in 2002 has to be considered heartening. Some of the harder hit areas of the economy, such as semiconductors and computers, have made impressive rebounds since December of last year. Many consumer goods categories of production have performed well, even as output of business equipment categories continues to languish.

More than anything, the disappointing news on manufacturing in August can be thought of as part of our collective education as to what "normal" growth is. Much as the down days on Wall Street have forced investors to accept the new realities of the market, the hesitation in growth in the industrial economy is a reminder to us that recovery in the "real" economy does not mean a quick return to the days of uninterrupted growth.