Good IP Data, but Drag from Utility Output

Industrial production headline increase of 0.1% seemed disappointing, but a quick look at the details shows a strong 0.9% rise in manufacturing output and a 2.3% increase in mining output (includes oil drilling). Utility output collapsed 6.4%, the largest decline in more than 4 years. This is wholly explained by the weather.

The increase in manufacturing partly a reflection of inventory building in some sectors and ongoing business and retail sales. Vehicle and parts output rose 2.2%, reversing 2/3 of the 3.9% drop in Feb. Consumer durable production increased 2% and business equipment output rose 1.4%. The increase in business equipment output speaks to capital investment.

Capacity utilization rates edged 0.2% higher to 73.2%. There is still plenty of slack in the industrial sector. Note the factory utilization rate is 70% vs 69.4% in Feb. The unexpected rise in weekly initial jobless claims, which officials are still attributing to Easter distortions, illustrates in any event, the slack in the labor market as well.

Earlier the Philly Fed data came out stronger than expected and the volatile TIC data showed private foreign purchases of long-term US securities remains strong. Most of the volatility appears to be coming from short-end securities.

Reports that Greece is seeking high level consultations with the IMF and ECB has sparked speculation that the aid facility will be drawn upon shortly. Some reports suggest the Dutch parliament has approved it, but of course the key focus is on Germany. Still, these developments have taken some pressure off Greek bonds and this more than the slew of US economic data appear to helping the euro recoup some of its recent losses. By extension the dollar is pulling back more generally. At the same time, the yen is seeing its cross rate strength moderate.