Industrial output was flat for the second month in a row in March. This time Utilities output rose instead of falling as it had done in February. Once again Mother Nature and weather create ugly impacts on our data. This time MFG output fell in the month. MFG output is off by 0.2% in March compared to gains of 0.9% in Feb and 1.1% in Jan. On the face of it, that's nothing to lose any sleep over. It means that IP in MFG rose at a 10.5% annual rate in Q1. But it also means that the strength, the best of it, came from three-months ago, and that is not good.
So are we really weakening? Is it weather? Is it Europe?
Good luck untangling this mess of effects...
With Europe cooling down there may be some concern that we are getting backlash on US output from Europe's troubles. But, oddly, the answer to that seems to be NO, or at least, not directly. US consumption of consumer goods is doing fine, but it is not impacting US output of consumer goods on balance. Hard to blame that one on Europe.
Durable goods output for consumers is doing relatively well but non-durable goods output is weak- lower output/consumption by consumers of energy goods is just one reason. Much of the consumer durable goods strength in Q1 output, however, is from January output. That means we are losing momentum in the quarter itself.
Moreover the place where weakness in Europe should create its (WWF) smack-down is in capital goods, But it isn't. That category is looking solid and strong, with consistent increases in output for each of the last three months (admittedly a weaker gain in March, but a gain).
So there are no easy answers here...There are weather effects in the mix. We do have a European crisis to worry about. The bad weather trends do distort output trends but we also have some tough things to explain. There are no simple interpretations to the data this month in IP...
Between the erratic housing starts report and the sputtering industrial output report with its various headline and multi-layered trends acting in confusing ways, the one thing we can admit is that assessing the US economy is not so easy anymore. That nice period of unbridled strength has taken a backseat to the economy that raises question marks - again.
IP is only an indicator; it has no formal role in the construction of a GDP estimate. But its slackening pace is not good news.
Dr Jekyll meets Mr Hyde.
And it's just in time for the run up to the elections. Fancy that? So much for the notion that anyone has been cooking these data; they have just turned half-baked.