As if today's disappointing announcement of slowing Industrial Production was not enough for all those still hoping for a hockeystick to the economy, we now get an update from Stone McCarthy which looks at the latest Wards Automotive data and sees what apparently nobody has factored into their models yet. In a nutshell, the annualized April motor vehicle assembly plunged at a 12% rate from 8.923 million in March to just 7.847, the lowest reading in all of 2011. From SMRA: "In the past, such a sizable drop in the assembly rate has usually translated into a sharp decline in motor vehicle output. We project motor vehicle output to decline by 9% in April, which would be entirely consistent with the drop-off in the assembly rate." The immediate impact: the drop in the industrial production already seen, but the bulk of it due to delayed aftereffects will likely impact the May number, as the follow through from the Japanese supply chain halt starts ringing a loud alarm bell across Wall Street. Of course, this is another thing that all those calling for a 4% H2 GDP could have absolutely not foreseen (and in fact it was originally supposed to be positive for the economy, eh Deutsche Bank?). Expect to see drastic downward cuts to May Industrial Production and next, to Q2 GDP.
And for those curious, here is Goldman's inability to spin today's Industrial Production in a favorable way.
Industrial production flat in April (mom) vs. GS +0.5%, median forecast +0.4%.
1. US industrial production stalled in April, due to a sharp decline motor vehicles and parts production (down 8.9%). This decline appears to be the effect of supply-chain disruptions resulting from the natural disasters in Japan. Overall manufacturing output declined by 0.4%, while output of manufactured products excluding motor vehicles and parts rose by 0.2% Together with downward revisions to previous months, these figures imply that the annualized three-month growth rate of manufacturing output excluding vehicles slowed from 8.4% in January to just 1.8% in April.
2. Mining and utilities output both increased (by 1.7% and 0.8%, respectively). The capacity utilization rate fell to 76.9% in April from 77.4% in March.