In what seems to be a key look at the impact of the Japanese disaster on US Industrial Production, the Fed said motor vehicle/parts production fell a sharp 8.9% in April m/o/m as the delivery of key parts from captive suppliers in Japan were halted. Capacity Utilization in the auto sector fell sharply to 61.9% from 68% and it also helped to drag down overall Utilization to 76.9% from 77.6%. Taking out the influence of auto’s, IP rose .2% led by electric utility output, computer/electronics production, machinery and mining.
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April Housing Starts totaled 523k annualized, 46k below expectations but March was revised up by 36k to 585k so taken together its about a wash relative to forecasts. Both single and multi family starts were down. Permits were well below forecasts at 551k vs the consensus of 590k and March was revised lower by 20k, also in both single and multi family categories. I’ve been making the argument for a while now but I repeat that lower starts are needed with a market that still has way too many homes relative to the demand for them and therefore lower permits and starts are good for the long term at the expense of the short term growth impact. The obvious impact of punk starts is the hit to the GDP component of residential construction but we still need the short term pain in order to further cleanse this economy of its previous excess.
