U.S. Industrial Production Surged 0.9% U. S. industries ramped up production in January as strong car sales helped buffer factories against a global economic slowdown, but the outlook remains muddied.
Industrial production jumped 0.9% in January from a month earlier, the Federal Reserve said Wednesday. Production hadn’t expanded by more than that in a single month since May 2010.
The boost reflected a surge in electricity generation due to last month’s cold weather, as well as higher manufacturing output to meet strong demand for new cars. But overall output has been declining over the past year, and it isn’t clear whether last month’s surge was a blip or the start of a broader rebound. (…)
Capacity use—a measure of economic slack—climbed seven-tenths of a point to 77.1%; in healthier expansions, it has run 80% and higher.
Economists surveyed by The Wall Street Journal expected industrial production to rise 0.4% in January and capacity utilization of 76.7%.
Production fell 0.7% in December, a bigger drop than the previously reported 0.4% decline. And over the past year, production is down 0.7%. (…)
Output by manufacturers—which accounts for two-thirds of all industrial output and is a harbinger of the economy’s health—grew 0.5% last month after falling 0.2% in each of the past two months. (…)
U.S. Housing Starts Fell for Second Straight Month
U.S. housing starts fell 3.8% from a month earlier to a seasonally adjusted annual rate of 1.099 million in January, the Commerce Department said Wednesday, the lowest rate since October. (…)
And new applications for building permits, a bellwether for forthcoming construction, edged down 0.2% to 1.202 million, from a downwardly revised December rate of 1.204 million, although they were up 13.5% from a year ago. (…)
Starts on single-family homes, which account for roughly two-thirds of the market, fell to a rate of 731,000 from December’s downwardly revised 761,000.
The rate for multifamily units, which include apartments and condominiums, fell to 368,000. (…)
Wednesday’s report showed new-home starts revised down to 1.143 million in December, compared with an initial estimate of 1.149 million. Temperatures dropped in January and a major snowstorm hit the East Coast, slowing construction activity after a warmer-than-usual winter.
Demand for housing has been strong over the past year, with starts up 10.8% in 2015 over 2014. But that momentum appears to have slowed slightly: Housing starts were just 1.8% higher for January over a year ago. (…)
See the writing on the wall of these 2 Haver Analytics charts?
Fed Seeing More Cause for Pause on Rates Federal Reserve officials appear increasingly reluctant to raise short-term interest rates at their March policy meeting, and possibly beyond, amid market turbulence, China’s dimmed outlook and indications that inflation could stay at low levels longer than expected.
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Bullard Admits It’s “Unwise” To Continue Rate Hikes, Says “If Needed” Will Do More QE
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Bank of Japan Baffled by Negative Reaction to Negative-Rate Policy A clash Thursday between Japan’s central-bank chief and lawmakers highlighted the downside of negative interest rates: They are making the Japanese public feel negative.
OECD Calls for Urgent Increase in Government Spending Governments in the U.S., Europe and elsewhere should take “urgent” and “collective” steps to raise their investment spending and deliver a fresh boost to flagging economic growth, said the OECD.
Don’t Panic About China’s Slowdown, Goldman Says
Hedge Fund Manager Hendry Says China Doomsayers Have It Wrong
OIL
Iraq Follows Iran by Avoiding Commitment to Oil Freeze Iraq stopped short of saying it would curb production of oil to prop up sagging prices, saying negotiations are still ongoing between members of the Organization of the Petroleum Exporting Countries.
(…) Oil Minister Adel Abdul Mahdi said his country supports any decision that will serve producers, prop up prices and achieve balance in the crude markets.
He didn’t explicitly say whether Iraq would curb its own output but said any mutual closeness between all sides to restrict crude output is a step in the right direction. (…)
Oil Prices Buoyed by Iran Meeting Guarded but conciliatory comments from Iranian official send Nymex prices soaring
(…) the country’s oil minister, Bijan Zanganeh, did say Iran would support any action to help oil prices recover, according to the country’s oil ministry website Shana.
“This is a first step and more steps must follow,” he said. “But this beginning of cooperation between OPEC and non-OPEC member states for the recovery of market is a cause of happiness and we also support any action for the stability of market and recovery of prices.” (…)
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Russia Sees Oil Output Slump in Worst Case Scenario
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S&P cuts credit ratings of Saudi Arabia, other oil producers
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Venezuela Boosts Gas Price, Devalues Bolivar as Economy Unravels
FYI
- Half of the S&P 500 now trades at a dividend yield that is above the 10-year U.S Treasury note yield.
- A total of 699 officers and directors of American companies purchased their own stock in the last 30 days compared with 828 who sold, the most bullish ratio in more than four years, according to data compiled by The Washington Service and Bloomberg. Stocks with the worst losses, such as financial firms, are seeing the biggest increase in demand. (According to a Bloomberg News report dated February 10th)
How Sanders, Trump Threaten Market Confidence Should either Donald Trump or Bernie Sanders get elected president, their brand of populist economics would bring unprecedented uncertainty and upheaval, writes WSJ chief economics commentator Greg Ip.
(…) Either would foreshadow unprecedented uncertainty and potential upheaval in government policy.
The risk lies not just in their policies, which are radical enough. Mr. Sanders would break up the big banks, introduce universal government-funded health care and raise the federal minimum wage to $15. Mr. Trump would slap steep tariffs on imports from China and Mexico and build a wall along the Mexican border to keep out immigrants.
The greater risk is that both men represent a rejection of economic orthodoxy. They don’t especially care that mainstream economists pan their proposals. Neither, apparently, do their growing ranks of supporters. A public whose inflation-adjusted incomes have been ratcheting downward since 1999 and overwhelmingly believes the country is on the wrong track may feel it has little to lose from unorthodox ideas. (…)
Markets may take comfort that even if one of these men became president, their more extravagant ideas wouldn’t get past Congress. That’s true especially of Mr. Sanders, since at least one chamber is likely to remain Republican-controlled. But presidents exercise extraordinary influence, through the regulatory and law-enforcement apparatus, the bully pulpit and diplomacy.
Andy Laperriere, an analyst at Cornerstone Macro, says a President Sanders could “beat the tar out of” banks, while a President Trump could start a trade war with China.
Moreover, Messrs. Sanders and Trump didn’t achieve their popularity in a vacuum. Many in Congress and the broader public share their populist distrust of globalization and finance. (…)