Today's Takeaways and Observations
Posted at 1:25 PM EDT on Friday, May 15, 2015
Second, recent correlation between higher bond prices and higher stock prices has decoupled briefly, with bonds soaring and stocks flat today. (We don't know if this is the start of a new trend).
Industrial Production Falls Again
Posted at 9:50 AM EDT on Friday, May 15, 2015
Industrial production in April fell 0.3%, worse than expectations of no change, but offsetting this was a three-tenths upward revision to the March figure so we'll consider it a push. The manufacturing component was flat month over month vs. the estimate of up 0.2%, but March was revised up by two-tenths. The mining component, which houses oil/gas drilling, continues to be an obvious drag as it fell for a fourth straight month.
Machinery orders also fell for the fourth month in the past five. Production of computers and electronics was unchanged after two months of negative prints. Motor vehicles/parts continues to be the bright spot as production rose 1.3% (month over month) and 7.2% (year over year). Capacity utilization was 78.2% and still remains below the 30-year average of 79.6% six years into a recovery. This also helps to explain why capital spending growth has been as modest as its been.
Bottom line, industrial production has fallen for five straight months, taking the Industrial Production Index to the lowest level since October. Mining, which makes up about 15% of this figure, is certainly a main factor but the Manufacturing Production Index is basically flat over the past five months.
The second quarter rebound from a likely first quarter contraction is fairly muted so far.
Bond yields have come in a tad since the IP release.