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Wednesday, April 15, 2009


industrial production continues its collapse

via calculated risk.

Industrial production fell 1.5 percent in March after a similar decrease in February. For the first quarter as a whole, output dropped at an annual rate of 20.0 percent, the largest quarterly decrease of the current contraction. At 97.4 percent of its 2002 average, output in March fell to its lowest level since December 1998 and was nearly 13 percent below its year-earlier level. Production in manufacturing moved down 1.7 percent in March and has registered five consecutive quarterly decreases. Broad-based declines in production continued; one exception was the output of motor vehicles and parts, which advanced slightly in March but remained well below its year-earlier level. Outside of manufacturing, the output of mines fell 3.2 percent in March, as oil and gas well drilling continued to drop. After a relatively mild February, a return to more seasonal temperatures pushed up the output of utilities. The capacity utilization rate for total industry fell further to 69.3 percent, a historical low for this series, which begins in 1967.

the beige book saw some signs of regional moderation in the rate of economic collapse, but alongside march retail sales and -- of particular interest -- unemployment claims, there's little here to suggest that the economy has turned around. to the contrary, in fact.

UPDATE: ft alphaville relays what dresdner thinks it will take for a sustained rally in credit.

Every time ISM found a bottom, spreads started to come in. But in each case, credit investors soon seemed to realise that ‘less bad’ news was not yet ‘good news’, and the spread path reversed. The real sustainable spread compression started only later… It is remarkable that these ‘true’ rallies all occurred only when ISM was back above 50 again (52 in most cases – as shown on the ISM graph), i.e. when manufacturing was expanding again. ...

One of the reasons why investors do not want to anticipate a rally too far ahead is the cost of getting it wrong. As we suggested before, even if there were scope for further spread compression, we think spreads would widen out again before starting a sustainable rally. In the current market environment, it is very difficult to get in and out at an acceptable cost (even if one were able to time it perfectly).

we're still a long way from ISM finding 50 again.

UPDATE: via CR, a mild improvement in unemployment claims.

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