Economic Outlook
Slow but steady gains
A disappointing March labor market report has some calling for another round of stimulatory monetary policy. This is a bit of an overreaction. While job growth was less than expected, the employment gains were still over 100,000 for the seventh consecutive month. One somewhat-softer-than-expected report can hardly be a justification for another major policy move.
Economic conditions in Europe remain soft at best. Loosely speaking, the North, led by Germany, is trying to avoid slipping into a formal recession. Much of the rest, especially those in the South, are trying to contain the magnitude of the recessionary fallout.
- February produced another solid positive signal from the leading indicator.
- It rose 0.7 points, surpassing the gains of 0.6 and 0.2 points in the preceding months.
- This reinforces the notion that the recovery remains on track.
U.S. Total Industrial Production:
- The Federal Reserve has issued its annual rebenchmarking revision of the industrial production data.
- The impact this time was minor, although comparisons to previous reports should be made cautiously.
- The newest of the new data show February production to have been effectively unchanged.
Construction Machinery, New Orders:
- January’s upward spurt was more than reversed by a 6.2% decline in February.
- Given the inherent volatility of these data this really isn’t all that big of a swing.
- Even with the decline, February’s order volume remained at a very high level.
Private Nonresidential New Construction:
- Volume declined 1.6% during February, after a comparable fall the previous month.
- Among the major component categories, only manufacturing recorded an advance.
- Some of this is weather; some may be a temporary pause in the nonresidential recovery.
European Composite Leading Indicator:
- The index has been modified slightly in that the reference series has been changed.
- This means the index is now designed to lead GDP as opposed to industrial production.
- The latest reading for February was positive; the first gain in many months.
Farm Machinery & Equipment Shipments:
- Real shipments slipped 1.0% during February.
- The month-to-month volume figures seem to have settled down following last summer’s massive surge.
- But the echo effect lingers in the smoothed data; the affected year-ago benchmarks lead to temporarily negative projected growth rates.
- Single-family starts tumbled just under 10% in February.
- This put February well below December/January, but in line with last November.
- Unusual weather patterns this year are likely causing some month-to-month distortions in the recent data.
Total Public New Construction:
- The report on public construction activity was not favorable.
- There was a 1.7% decline during February that came off of a downwardly revised January estimate.
- Needless to say, these are challenging times for publicly funded construction projects.
Industrial Production, United Kingdom:
- Overall production rose modestly in February, while manufacturing output fell 1.0%.
- The unusual weather contributed to both moves.
- Even ignoring the weather effects, the industrial sector has not provided the drive that many have been expecting.
Industrial Production, Germany:
- Production in Germany fell 1.3% during February.
- A substantial part of this was cold weather; construction in particular plunged.
- Much of this ground should be reclaimed in the coming months.
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