Just a few brief thoughts here regarding this morning’s data. All in all, the data was somewhat constructive, but the China fears are beginning to boil over into U.S. equities. The Empire State Manufacturing Survey is showing strength that is very similar to recent ISM reports and the other regional surveys. This month showed continued broad strength including notable jumps in employment and new orders. Econoday details the report:
“New orders, shipments, inventories, delivery times and employment are all posting month-to-month increases in New York state’s manufacturing region, offering a convincing indication of building strength at the national level. The Empire State’s general business conditions index did slow by more than 2 points to 22.86 in March, but the reading is still far over zero to indicate significant month-to-month expansion.
The headline reading masks wide strength in the individual indexes: new orders 25.43 in March vs. 8.78 in February, shipments 25.58 vs. 15.14, inventories 4.94 vs. 0.00, delivery time 2.47 vs. minus 6.94, employment 12.35 vs. 5.56.”
The industrial production report was a bit more mixed. While the headline figures came in better than expected a little digging reveals some marginal weakness. The production figure was boosted by sizable gains in utilities output which is primarily weather related. Capacity utilization at 72.7, was better than analysts estimates of 72.4, but continues to substantially lag the 80 level that represents an economy that is “recovered”. The pace of recovery certainly appears to be slowing as the utilization rate barely eeks out a month on month gain.
The market is largely ignoring the two reports which were essentially in-line with expectations. Stocks are falling this morning on concerns that China’s economy will slow in the coming months as policymakers tighten their monetary & fiscal stance in order to reign in an overheating economy.