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Industrial Production Weakens, Misses Consensus, As Capacity Utilization Peaks

Tyler Durden's picture




 

And another contractionary economic data point: Industrial production in April was unchanged M/M on expectations of a 0.4% increase, and following a downward revision to March's 0.7%. Additionally, capacity utilization dropped to 76.9% from 77.4%, and substantially less than the expected 77.6%. And there is your "slack in the economy" redflag that the Fed loves so much, and which traditionally is one of the key variables in determining future monetary loosening. Also, as the chart below shows, we may have well peaked in the recent capacity utilization cycle. As for specific industry groups, there was more weakness than the headline indicates: "The production of consumer goods decreased 0.7 percent in April because of weakness in the output of consumer durable goods. The index for business equipment fell 0.4 percent in April following a loss of 0.5 percent in March. The production index for defense and space equipment was unchanged in April after decreasing 0.3 percent in the previous month. Among nonindustrial supplies, the output of construction supplies declined 0.1 percent in April. The output of materials to be processed further in the industrial sector rose 0.3 percent in April after increasing 0.9 percent in March." The Japan effect is starting be felt.

From the Fed:

Industrial production was unchanged in April after having increased 0.7 percent in March. Output in February is now estimated to have declined 0.3 percent; previously it was reported to have edged up 0.1 percent. In April, manufacturing production fell 0.4 percent after rising for nine consecutive months. Total motor vehicle assemblies dropped from an annual rate of 9.0 million units in March to 7.9 million units in April, mainly because of parts shortages that resulted from the earthquake in Japan. Excluding motor vehicles and parts, factory production rose 0.2 percent in April. The output of mines advanced 0.8 percent, while the output of utilities increased 1.7 percent. At 93.1 percent of its 2007 average, total industrial production was 5.0 percent above its year-earlier level. The rate of capacity utilization for total industry edged down 0.1 percentage point to 76.9 percent, a rate 3.5 percentage points below its average from 1972 to 2010.

 

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Tue, 05/17/2011 - 09:35 | 1282613 NOTW777
NOTW777's picture

understatement of the day

05-17 09:16: Pimco's El-Erian says there is too much debt in the system

Tue, 05/17/2011 - 09:43 | 1282632 firstdivision
firstdivision's picture

Lulz!  I guess that is what happens when a government steps in to prevent the natural laws of finance to take place.  Instead of allowing bad debts to implode, we just place it on the Feds balance sheet and the music keeps playing. 

Tue, 05/17/2011 - 09:52 | 1282669 dick cheneys ghost
dick cheneys ghost's picture

OT: Anyone read this from Goldseek about IMF/BIS.........Tyler can you do a story on this......would love to read the comments from the guys........this is some incredible immunity these fukctards get......

http://news.goldseek.com/GoldSeek/1305564523.php

 

Tue, 05/17/2011 - 10:05 | 1282728 LawsofPhysics
LawsofPhysics's picture

Thanks for the link.  Good information.

Tue, 05/17/2011 - 15:59 | 1284398 RockyRacoon
RockyRacoon's picture

Yeah, but.   The IMF has stated that Dominique Straus-Kahn was in NY on personal matters.

And, from your article:

Further, members of the BIS board of directors (for instance, Alan Greenspan) are individually granted special benefits:

·         “immunity from arrest or imprisonment and immunity from seizure of their personal baggage, save in flagrant cases of criminal offence;”

Tue, 05/17/2011 - 09:35 | 1282615 wang
wang's picture

Japan earthquake, late Easter, rainy spring in the NE

Tue, 05/17/2011 - 09:47 | 1282651 Cognitive Dissonance
Cognitive Dissonance's picture

It's my understanding that 2% less "Swallows of Capistrano" returned this year based upon a random sampling of bird droppings. Certainly this had something to do with the US's economic problems. 

Tue, 05/17/2011 - 09:43 | 1282629 NOTW777
NOTW777's picture

SP gap 1312

Tue, 05/17/2011 - 09:44 | 1282640 baby_BLYTHE
baby_BLYTHE's picture

Looks like we are about ready to enter another Recession.

I believe Tyler's running thesis will hold- one more deflationary scare followed by Hyper-Inflation and total collapse.

So one more BIG opportunity to back up the truck and load up on PMs (Of course no supply guarantees).

Skin the banksters alive!

Tue, 05/17/2011 - 09:56 | 1282677 centerline
centerline's picture

That looks to be the play.  Deflationary shock is needed to pass the blame.  Politicians are playing right into it of course.  So will most idiot sheeple of course.  All wil cry for help, and demand QE3.  This time, I'll bet they will call it the "bail out for Main Street."  Political correct poision.

Tue, 05/17/2011 - 10:18 | 1282794 ElvisDog
ElvisDog's picture

At first I was going to disagree with you, because QE3 would only help the big banks and the sheeple won't cry for more POMO (because 99% of them don't know what it is). But then I realized that what Main Street will clamor for is continued deficit spending by the Federal Government. And that's where QE3 comes into play as a mechanism for funding the deficit. I agree that QE3 is coming our way but won't be intended to help the banks but rather to fund deficit spending.

Tue, 05/17/2011 - 10:36 | 1282904 Zing
Zing's picture

Have to set up the people for this though, and the best way to do this is to allow a sharp deflationary wave to wreak destruction.  THEN, QE will become an eventuality. 

Tue, 05/17/2011 - 09:59 | 1282689 Zing
Zing's picture

Completely agree.  If we see a pullback on gold to <$1000 or thereabouts, I will be backing up the truck.  Though I will be passing up on silver. Strictly central bank reserve metal for me.

Tue, 05/17/2011 - 09:45 | 1282641 bob_dabolina
bob_dabolina's picture

Financials are strong today with all things considered.

Tue, 05/17/2011 - 09:45 | 1282644 firstdivision
firstdivision's picture

Well with inventories running at such high levels and new orders in such decline, it would follow that industrial production would have to decline or is QE3 going to be the Fed's buying the oversupply and burning it?

Tue, 05/17/2011 - 09:43 | 1282646 RobotTrader
RobotTrader's picture

Gasoline futures getting crushed today.

All the banks on my screen are green today.

Full control by TPTB.

Inflation has been "whipped"!!!

Tue, 05/17/2011 - 09:47 | 1282659 bob_dabolina
bob_dabolina's picture

Yes....today

They've been trending down since March with the 50 under the 100

Tue, 05/17/2011 - 09:47 | 1282660 firstdivision
firstdivision's picture

Just like last year. The ones that do not know how to play the game got out, while those that knew the Feds would keep the free money flowing, stayed in. 

Tue, 05/17/2011 - 09:48 | 1282653 Zing
Zing's picture

Denninger's site is down.

Tue, 05/17/2011 - 09:49 | 1282658 ivars
ivars's picture

Silver is going to hit 31,5 this week, I guess.

At the moment of writing, silver looks very determined to take out the previous bottom of 32, 3 very soon.

Where are the margin increases to unmask the conspiracy or billions of Chinese buyers when they are needed to show the true value of silver TODAY!

Tue, 05/17/2011 - 09:53 | 1282666 treemagnet
treemagnet's picture

How long before Ben starts to track output of printing in his calculations of industrial output - at some point its gonna be quite a bit of production.  Trucks, machinery, bodies, electricity, layers of mgmt., tankers full of ink - hell, unit trains full of ink....think of the positive impact.  You know he's thinking it.

Tue, 05/17/2011 - 09:52 | 1282671 Mercury
Mercury's picture

Can/will capacity utilization rise by removing capacity (shutting down & not replacing old equipment etc.) just as the unemployment rate can go down in a worsening jobs market when people "leave the workforce"?

Tue, 05/17/2011 - 10:06 | 1282717 campag
campag's picture

813.40 MASSIVE number on Russell2000 they have protected it once today . Can it survive ? 

Tue, 05/17/2011 - 10:03 | 1282721 campag
campag's picture

813.40 MASSIVE number on Russell2000 they have protected it once today . Can it survive ? 

Tue, 05/17/2011 - 10:17 | 1282780 r101958
r101958's picture

IMO, the fall in commodities is reflecting the upcoming double (triple) dip recession. TPTB are still supporting equities however, they are not supporting commodities as they have already reaped their profits from them and could care less now if they lose value. High commodity prices do not support the happy face 'recovery' perception that they are trying to sell us.

Tue, 05/17/2011 - 10:20 | 1282803 campag
campag's picture

after hours attack a possibilty - same as  last night?

Tue, 05/17/2011 - 10:32 | 1282868 r101958
r101958's picture

Par usual.

Tue, 05/17/2011 - 11:43 | 1283163 Libertarian777
Libertarian777's picture

everyone calm down.

This is awesome news. It means (in Fed-speak) that the slack in the economy is accelerating, meaning less upward wage price inflation. In fact there's real threat of deflation (beating drums)...

QEn to be announced shortly. To co-incide with the debt-limit increase.

 

<sarc off>

Tue, 05/17/2011 - 11:52 | 1283232 slewie the pi-rat
slewie the pi-rat's picture

yes, i think this is the "japan effect"---$4 Tril later, big black swan causes unexpected slowdown. 

i think there's plenty of money around.  let's see how capital deals with the japan effect.  minds may already have conceived workable answers.  the work takes time, tho. not just money. 

doesn't it?

Tue, 05/17/2011 - 12:03 | 1283294 AldoHux_IV
AldoHux_IV's picture

All that extra capacity utilization we used to have was all on margin that no longer exists-- so it will act as the carte blanche for the fed to do whatever they want in terms of destroying the dollar in order to fulfill the biggest wealth transfer and economic genocide we've seen to-date.

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