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Factory Production Declined, Weather May Have Played a Role
March 15, 2010
by Asha Bangalore

Industrial production moved up only 0.1% in February following a string of strong gains since July 2009.  The February gain is, in fact, the smallest increase in the last eight months.  The Fed indicated that bad weather in February could have trimmed the pace of production.  Excluding the increase in the mining and utilities components, factory production slipped 0.1% in February.  
 DGC 3.15 #1

Industrial Production - February 2010 
 DGC 3.15 TABLE A

The details of the report show a 4.4% drop in auto production, while primary metals, furniture, and related products also posted declines.  Production of computers and electronic products, electrical equipment, appliances, and components advanced during February but the pace of growth was inadequate to offset declines among other components.  Factory production rose 1.4% from a year ago, marking the second consecutive monthly increase (see chart 2), which is noteworthy.  
 DGC 3.15 #2

The operating rate of the nation's industries moved up slightly in February to 72.7% from 72.5% in January.  The factory sector's capacity utilization rate edged down 0.1% to 69%, which is 3.9% higher than the historical low of 65.1% recorded in June 2009 (see chart 3).  The noticeably low operating rate of the factory sector suggests that investment in new projects is unlikely in the near term, with replacement demand accounting for the increase in capital spending.  
 DGC 3.15 #3

Decline of Housing Market Index is Troubling

The Housing Market Index (HMI) of the National Association of Home Builders slipped to 15 in March from 17 in the prior month.  On a quarterly basis, the HMI has dropped for two consecutive quarters. Indexes measuring home sales during the next six months (24 vs. 27 in February) and traffic of prospective buyers (10 vs. 12 in February) fell, casting a shadow on the housing market. Housing starts for February are scheduled for publication tomorrow.  Based on the 4.8% drop in permit extensions during February, a decline in housing starts during March should not be surprising.  Starts of single-family homes have risen nearly 25% from the record low reading of 388,000 in April 2009.
 DGC 3.15 #4

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.
© 2010 Northern Trust Corporation
 
 
 
Northern Trust - Daily Global Commentary
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Factory Production Declined, Weather May Have Played a Role
March 15, 2010
by Asha Bangalore

Industrial production moved up only 0.1% in February following a string of strong gains since July 2009.  The February gain is, in fact, the smallest increase in the last eight months.  The Fed indicated that bad weather in February could have trimmed the pace of production.  Excluding the increase in the mining and utilities components, factory production slipped 0.1% in February.  
 DGC 3.15 #1

Industrial Production - February 2010 
 DGC 3.15 TABLE A

The details of the report show a 4.4% drop in auto production, while primary metals, furniture, and related products also posted declines.  Production of computers and electronic products, electrical equipment, appliances, and components advanced during February but the pace of growth was inadequate to offset declines among other components.  Factory production rose 1.4% from a year ago, marking the second consecutive monthly increase (see chart 2), which is noteworthy.  
 DGC 3.15 #2

The operating rate of the nation's industries moved up slightly in February to 72.7% from 72.5% in January.  The factory sector's capacity utilization rate edged down 0.1% to 69%, which is 3.9% higher than the historical low of 65.1% recorded in June 2009 (see chart 3).  The noticeably low operating rate of the factory sector suggests that investment in new projects is unlikely in the near term, with replacement demand accounting for the increase in capital spending.  
 DGC 3.15 #3

Decline of Housing Market Index is Troubling

The Housing Market Index (HMI) of the National Association of Home Builders slipped to 15 in March from 17 in the prior month.  On a quarterly basis, the HMI has dropped for two consecutive quarters. Indexes measuring home sales during the next six months (24 vs. 27 in February) and traffic of prospective buyers (10 vs. 12 in February) fell, casting a shadow on the housing market. Housing starts for February are scheduled for publication tomorrow.  Based on the 4.8% drop in permit extensions during February, a decline in housing starts during March should not be surprising.  Starts of single-family homes have risen nearly 25% from the record low reading of 388,000 in April 2009.
 DGC 3.15 #4

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.