Implications: Industrial production grew a strong 0.8% in March, beating consensus expectations. Although mining and utilities both accelerated, the lion's share of the growth came from manufacturing, which rose 0.7% and is up at a 9.2% annual rate in the past three months. Much of the factory gain was due to the auto sector, which expanded 2.9%. Motor vehicle production has exploded upward in the past three months, rising at a 55% annual rate. Given temporary shortages of parts related to the earthquake, tsunami, and nuclear/electricity problems in Japan, some US automakers may shift traditional summer shutdowns into the spring. As a result, auto production may slip in Q2 and then surge again in Q3. So for the next few months, we will focus on manufacturing excluding autos to see whether the underlying trend remains strong. In March, manufacturing output ex-autos was up 0.6% and is up at a generous 6.1% versus a year ago. We think production is going to continue to move higher and will likely keep being led by business equipment. Inventories are low, corporate profits are at a record high and so is cash on the balance sheets of non-financial companies. In other manufacturing news this morning, the Empire State index, a measure of activity in New York, increased to +21.7 in April from +17.5 in March. The consensus had expected a slight dip to +17.0. The sub-indexes for new orders, shipments, and the number of workers all surged to substantially higher levels.
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Posted on Friday, April 15, 2011 @ 11:19 AM
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