US: NY Fed shows unexpected deterioration in confidence
In March, the NY Empire State manufacturing index showed a worsening in business sentiment, while a slightly less negative outcome was expected. The headline index dropped to -38.23 (from -34.65), while the consensus was looking for a figure of -30.80. The breakdown shows a plunge in shipments (-26.66 from -8.13) and inventories (-26.97 from -8.05), but also new orders (-44.76 from -30.51) deteriorated significantly. Number of employees, unfilled orders and delivery time show a marginal improvement and average workweek rose from -31.03 to -23.60. The empire state manufacturing index is now at a new cyclical low which indicates that the various stimulus plans were unable to boost producers’ confidence.
US industrial production came out in line with expectations in February. On a monthly basis, industrial production dropped by 1.4% M/M, while a decline by 1.3% M/M was forecasted. The January outcome was downwardly revised from -1.8% M/M to -1.9% M/M. The decline was led by a 7.7% M/M plunge in utilities due to above-average temperatures, while manufacturing dropped by 0.7% M/M and mining fell by 0.4% M/M. The decline in manufacturing was softer than in previous months due to a rebound by 10.2% M/M in motor vehicles and parts as GM produced significantly more cars than in January. Compared to one year ago, industrial output is down by 11.2% Y/Y. Capacity utilization dropped to 70.9% (from 71.9%), matching with the historical low recorded in December 1982. The very weak industrial production data both in January and February raise fears that GDP will show another serious contraction in the first quarter of 2009.
The NAHB housing market index stabilized at 9 in March, exactly matching the forecasts. The index however, remains very far below the neutral level of 50, which indicates that mounting foreclosures, plunging prices and a flood of unsold properties continue to put a drag on homebuilders’ sentiment.
EMU: CPI rises by 0.4% M/M in February
Euro zone CPI came out in line with the earlier released CPI estimate. On a monthly basis, CPI rose by 0.4% M/M in February. Looking at the details, food dropped by 0.1% M/M, while all other categories were rising. Due to the slight increase in oil prices, energy prices grew by 0.5% M/M and transportation increased by 0.6% M/M. The year-on-year figure rose by 1.2% Y/Y, while core CPI came out at 1.7% Y/Y (from 1.6% Y/Y). The slight increase in core CPI might be due to the unwind of strong discounting in January as for example clothing rose by 1.5% M/M after falling by -10.6% M/M in January. Nevertheless, CPI inflation is expected to decline sharply in the coming months and (temporary) negative inflation is not excluded.
