Ouch!
From a scan of Briefing.com this morning, I knew industrial production and capacity utilization numbers were due out today, along with housing starts and the Michigan Sentiment report, e.g., one measure of consumer confidence. However, I guess I'd grown pretty complacent, with the generally good news emanating from earlier economic reports this week. Boy, was I in for a shock when I checked the Times a few minutes ago:
Industrial Output Unexpectedly Drops in March
By REUTERS Published: April 16, 2004WASHINGTON (Reuters) - U.S. industrial production unexpectedly fell in March, dragged lower by softer demand seen at utilities and factories, a Federal Reserve report on Friday showed.
Output dipped 0.2 percent in March, after an upwardly revised 0.8 percent rise seen in February. The Fed attributed a 2.3 percent decline in utilities output to "unseasonably warm weather." Factory output, which accounts for more than 80 percent of overall industrial production, was flat.
The Fed said the drop in March utilities production was the biggest since March 2003.
Capacity in use at factories, utilities and mines also slipped in March, dropping to 76.5 percent from 76.7 percent in February. Wall Street had expected utilization to rise to 76.8 percent and output to show a 0.3 percent rise.
Housing starts were up, although that was expected after the March jobs report placed a big chunk of the new hiring in construction, buoyed by warmer than average weather. But the sudden downturn in manufacturing is of concern, particularly if it's not just a blip. Skyrocketing energy costs could be a culprit - I need to look closer at the actual reports, and will update later.
In addition, despite all the warm and fuzzies the Bush talking head are trying to push, American consumers aren't buying it. The Michigan Sentiment index dropped 2.6 points, a shock for the market which expected a 2 point increase.
Not a great way to end the week, and even investors are confused. Earlier this week inflation fears saw Wall Street turn skittish, as the spector of higher interest rates rose again. But if manufacturing is still seen as slumping, chances of the Fed raising rates, and thus discouraging investment, decreases exponentially.
The markets hate uncertainty, whether economic, social or political. If Bush can't get his lackeys to convince the money men that he's got thing under control, in Iraq and in Peoria, then things will only get worse in lower Manhattan. Stay tuned.