Economic data

Feb IP rose .1%, above expectations of flat with Capacity Utilization at 72.7%, .2% higher than forecasts and is up from 72.5% in Jan. Utilization, while well below the long term average of 80%, and the basis behind the output gap worries of the Fed, is at the highest since Dec ’07 but the gain was led by mining and utilities as manufacturing utilization was down slightly to 69%. The overall gain in IP was also led by mining and utilities as manufacturing IP fell .2% due to a 4.4% drop in motor vehicle production. With lean inventories as seen in last week’s data, producers just need some more confidence that end demand will see sustainable growth in order to further pick up production and get us to a self sustaining recovery. While there are some signs of it, the inconsistencies in them with still major debt overhangs apparent are combining to create the lumpiness in the recovery.

Jan long term net foreign purchases of US assets totaled $19.1b, below expectations of +$47.5b and down from $63.3b in Dec. Treasury purchases remained healthy at $61.4b but foreigners sold $5b of GSE paper and $24.6b of corporate bonds (selling now in 9 of last 10 months). Foreigners bought a net $4.3b of US stocks and has been a net buyer for 11 straight months now. US investors bought $17b worth of foreign bonds and stocks. China sold $5.8b of US Treasuries but some to all of that may have been the maturing of short term securities rather than outright selling of longer term maturities. They remain well in the lead of largest holders still at $889b. Japan, at #2 has $765.4b worth after selling a modest amount in Jan.

The Mar NY manufacturing survey, the first Mar industrial # out, was a touch above expectations at 22.9 vs the forecast of 22 and down from 24.9 in Feb. The components though were strong as the headline is not a sum of its parts. New Orders rose to 25.6 from 15.1 and it’s the highest since Oct ’09. Employment rose to 12.4 from 5.6, the highest since Oct ’07. Backlogs rose to 4.9 from 2.8, the highest since June ’06. Inventories went positive for the first time since Aug ’08. Prices Paid fell 2 pts but remains 6 pts above its 6 month average and Prices Received doubled to 8.6, the highest since Oct ’08 and is a sign that businesses are having some success in passing on some higher costs. The 6 month outlook rose 1.5 pts to 54.3 and is in line with the 6 month average. In a related question, 24% of firms surveyed, down from 39%, saw more tightening in credit availability with 11% noting easing. Net-net, manufacturing continues to be the focal point of recovery.

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