In the US, consumer prices dropped by 0.1% M/M in March, while a slight increase was expected. Also the yearly figure surprised on the downside of expectations (- 0.4% Y/Y). Much of the decline was energy related, but also food prices showed a slight drop. As a result, core CPI, excluding food and energy, stayed unchanged at 1.8% Y/Y, while a marginal rise was expected. Consumer price inflation is now in negative territory for the first time since August 1955 and is expected to decline further in the coming months.
US industrial production dropped by 1.5% M/M in March, while a decline by 0.9% M/M was expected. The drop was led by a 3.2% M/M decline in mining, but also the manufacturing sector was again hit hard (-1.7% M/M), while utilities rose by 1.8% M/M. Compared to one year ago, industrial production is down by 12.8% Y/Y and capacity utilization dropped further to 69.3%, a record low. The very weak industrial production data in the first three months of 2009 raise fears that GDP will show another sharp contraction in the first quarter of this year.
In April, the empire state manufacturing index improved significantly while the consensus was looking for only a marginal increase. The headline index rose from - 38.23 to -14.65, while an outcome of -35 was forecasted. Looking at the details, the improvement was driven by a surge in new orders (-3.88 from -44.76) and shipments (-1.79 from -26.66). Also delivery time, unfilled orders and the number of employees rose, while inventories and average workweek dropped. The significant improvement in regional business sentiment is an encouraging sign, but should be confirmed by the other regional indicators.
