U.S. Industrial Production Falls for Fifth Straight Month U.S. industrial production fell for the fifth consecutive month in April, suggesting weak global demand, a stronger dollar and lower oil prices continue to limit output.

Industrial production decreased a seasonally adjusted 0.3% from the prior month, the Federal Reserve said Friday. It was the fifth consecutive monthly decline.

Capacity utilization, a measure of slack in the industrial sector, fell four-tenths of a percentage point to 78.2% in April. Lower capacity utilization could reflect businesses holding off on investment and consumers avoiding major purchases, damping economic growth. At its current level, capacity utilization was slightly below its long-run average recorded since 1972.

Overall industrial output in April was up just 1.9% from a year earlier. (…)

U.S. industrial production had been mixed through the second half of last year, before dropping off in December. In the first quarter of 2015, industrial production posted the first quarterly decline since the recession ended, the Fed said last month. (…)

March’s industrial production reading was revised to a 0.3% decline from a 0.6% fall. But February’s gain of 0.1% was revised lower to a 0.1% decline.

Manufacturing output, which accounts for about three-quarters of overall industrial production, was unchanged in April. A small increase in the production of long-lasting durable goods, including wood products, motor vehicles and appliances, was offset by a small decrease in nondurable goods like food, beverages and tobacco products, the Fed said.

March’s manufacturing figure was raised to 0.3%, from a previously reported gain of 0.1%. (…)

Mining output, the second-biggest component of industrial production, fell by 0.8%, the fourth straight monthly decline. The drop off largely reflected a sharp decline in oil and gas drilling, which fell by 14.5% last month and is down 46.5% from a year ago. (…) (Chart from Haver Analytics)

Last 4 months (last 2 month) at annual rates:

• Total output: –3.0% (-3.7%)
• Manufacturing: –1.5% (+1.8%)
•   Consumer Goods: +1.2% (-2.4%)
•   Business Equipment: –0.6% (0.0%)
•   Construction Supplies: –7.8% (-7.3%)

This is happening while U.S. manufacturing is said to be going through a renaissance…

U.S. MANUFACTURING EMPLOYMENT

AVERAGE HOURLY EARNINGS- MANUFACTURING 

Q2 BOUNCE WATCH

(…) The production data show that re-acceleration in the economy in the current quarter is modest, particularly compared to the sharp snap-back that occurred last year following a disappointing first quarter.

While last year’s weakness could be explained by numerous “polar vortexes” spanning January through March, the weather story is much less compelling this year, with the exception of February. There are different factors contributing to first-quarter weakness this time, and so the profile of the re-acceleration looks different, and milder. (…)

The first-quarter average for industrial production is now down 0.7 percent annualized relative to the previous quarter, and April is down 2 percent relative to the first quarter. Until 2015, industrial production had not posted a quarterly decline since the recovery from the last recession in late-2009. (…)

The slump in capacity utilization bodes poorly for any meaningful pickup in business fixed investment in the near term, as capacity constraints tend to drive private sector capital investment. As a result, non-residential fixed investment in the GDP accounts is unlikely to be a meaningful driver of the economy over the next few quarters. Similarly, productivity is unlikely to improve significantly until businesses invest in productivity-enhancing infrastructure.

The tepid industrial production data followed a weak report on April retail sales from earlier last week. Analysts who were looking to these two major data points for guidance on the underlying momentum in the domestic economy got a cool read to be sure. The good news is that the slump in the first quarter is not extending into the second quarter. The bad news is that the second-quarter rebound is setting up to be quite mild. (BloombergBriefs)

U.S. HOUSING: Rent vs. Buy

Homeownership remains cheaper than renting in all 100 largest U.S. metro areas. In fact, buying is 35% cheaper than renting now, compared with 33% cheaper one year ago. Paradoxically, home price growth nationally has outpaced rents over the past year. So what gives? Two things. First, the 30-year fixed-rate mortgage rate has fallen from 4.5% in 2014 to 3.87% today (as of April 15). Second, the 3.9% home price gain wasn’t much larger than the 3.7% gain in rents. In the past year, these two trends have made homeownership even more affordable compared with renting.

Trulia’s Rent vs. Buy Report assumes a traditional 30-year fixed rate mortgage with a 20% down payment. But for those looking to buy a home, apartment, or condo with homeowner association (HOA) fees, the extra cost could make renting a more attractive option. (…)

Strong Dollar Makes U.S. Real Estate Less Attractive to Foreigners Buyers paying in rubles, euros or Canadian dollars see much higher prices in key markets

(…) “Foreign buyers have been a big part of the rebound in home prices in the U.S.,” said Stan Humphries, chief economist at real-estate website Zillow. “The recent strength of the U.S. dollar has significant implications for the attractiveness of the market for foreign buyers.”

(…) But while Canadian snowbirds are having a harder time finding easy bargains in sun-splashed locales, some real-estate agents say wealthy South Americans and Chinese are still seeking to secure U.S. properties, even those they intend to leave vacant, as safe places to store wealth. Agents say that perception has only been reinforced by the dollar’s recent rise.

Canadian buyers, who are a relatively short flight from U.S. vacation hotspots, are of particular importance to the domestic housing market. In 2014, they accounted for 19% of all international transactions, according to the National Association of Realtors. That figure is down from 23% in 2011, when the Canadian dollar’s exchange rate was more favorable.

Peter Terracciano, owner of the RE/MAX Consultants agency in Palm Desert, Calif., said western Canadians represent the bulk of his clients for seasonal vacation properties. That segment of his business is down 30% from a year ago, he said. The drop-off is even larger among properties priced at $1 million or more.

(…) In March 2011, Canadians accounted for 5% of all home sales in the Phoenix area, according to the W.P. Carey School of Business at Arizona State University. That represented a larger fraction of buyers than from any single state other than Arizona. In March of this year, Canadians accounted for just 1% of sales.

In some Arizona retirement communities, Canadians made a quarter of all purchases from 2008 through 2012, said Mike Orr, director of the university’s Center for Real Estate Theory and Practice. (…)

Currency rates have less influence on Chinese buyers because the yuan closely tracks the dollar. But escalating real-estate values, especially in California, and the dollar’s strength against other currencies make U.S. investments attractive for Chinese buyers, said Li Li Hwang, an agent with Century 21 Beachside in Rancho Cucamonga, Calif. She frequently works with Chinese buyers and actively advertises that she is bilingual.

Two Chinese clients recently closed on a property during a one-week visit to Southern California, Ms. Hwang said. Purchasers are often seeking property to improve their chances to obtain a U.S. visa or as housing for children attending a local university.

For Chinese buyers, the “stronger dollar will indicate that the U.S. is the most safe country” for investors concerned about a slowing economy at home, Ms. Hwang said. “It will give them much more confidence and protection.”

China’s Improving Property Scene Still a Drag Property prices may be rising in China’s biggest cities, but huge swaths of the country are mired in unsold inventory.

Official government data released Monday showed nationwide property prices falling in April, but more slowly than before. The trend is clearly toward a leveling out and possibly a rebound in prices. In China’s four so-called tier-one cities — Beijing, Shanghai, Guangzhou and Shenzhen—prices are actually rising again.

(…) the central government data show a nationwide inventory-to-sales ratio of four months, while the local data put the figure as high as 24 months in the middle of 2014.

The most serious inventory problems are concentrated in a handful of provinces in the industrial northeast, which has been hit particularly hard in the slowdown. Inventory-to-sales ratios in this region were over 40 months in 2013, the most recent data available show, and before the worst of the inventory buildup last year. That compares to less than 12 months of inventory in China’s richest cities.

It is hard to dismiss these areas as unimportant. Together, the provinces Hebei, Heilongjiang, Jilin, Liaoning and Shandong make up nearly a quarter of China’s gross domestic product. (…)

Russia economy declines 1.9% in first quarter

The contraction was much narrower than expected. Economists’ forecasts for the first quarter had ranged from -2 per cent to -4.5 per cent, and even Russia’s ministry of economic development had expected a 2.2 per cent drop. (…)

According to monthly data released by Rosstat, the government statistics agency, earlier in the year, the drop in retail sales, which started in January, was still gaining pace with a 8.7 per cent drop in March. A continued slide in fixed asset investment, which has been sluggish since 2013, appeared to have slowed in March. (…)

Industrial production contracted 1.6 per cent in February and by just 0.6 per cent in March. But some industry sectors have performed markedly better. The weak rouble has helped companies in the chemical industry and in food production, boosting their competitiveness versus foreign rivals. (…)

Thai Economy Struggles to Grow as Exports Wilt Thailand’s modest economic growth in the first quarter of 2015 is casting a shadow on the recovery of Southeast Asia’s second-largest economy.

Thailand’s gross domestic product expanded 3.0% from a year earlier in the first quarter, the National Economic and Social Development Board said Monday. The latest figure was an improvement from the revised 2.1% year-over-year growth recorded in the fourth quarter of 2014 but was below the median 3.41% growth forecast by economists polled by The Wall Street Journal.

Thailand’s exports, which account for around two-thirds of GDP, look less likely to help propel the recovery after data showed a 4.3% on-year contraction in the first quarter. Exports have been hit by an economic slowdown in the country’s key trading partners—particularly Japan and China—the end of the European Union’s tax privileges for Thai products from Jan. 1, and a stronger baht.

On a quarterly basis, Thailand’s economy expanded 0.3% in seasonally adjusted terms in the first quarter. The official figure is better than the poll’s median forecast of a 0.5% contraction, but is below the revised 1.1% on-quarter growth in 4Q14.

Oil Rises on Mideast Tensions

Over the weekend, Islamic State militants seized control of Ramadi, the capital of Iraq’s largest province, located around 110 kilometers from the capital Baghdad.

Meanwhile, Saudi-led airstrikes have resumed in Yemen as a five-day cease-fire between a Saudi-led military coalition and Yemen’s Houthi rebels expired on Sunday night.

Iran deputy oil min says OPEC unlikely to cut output The Organisation of the Petroleum Exporting Countries (OPEC) is unlikely to implement a production cut at its next meeting in June, a senior Iranian official said on Monday.

(…) Iran hopes its crude oil exports will return to pre-sanctions levels within three months once a deal with major powers to lift an oil embargo is finalised, he said.

“We hope we can come back to the export levels that we had before the sanctions,” Javadi, who is also the managing director of the National Iranian Oil Company, told Reuters.

“Yes, 2.5 (million barrels per day), around,” he said, adding that this could possibly be achieved in three to six months. (…)

Iran currently has less than 10 million barrels of crude stored onboard tankers that could be released post-sanctions depending on market conditions, Javadi said.

He said the OPEC producer expected to claw back lost market share in Asia and Europe.

“It depends on market situation and price level, but we will come back to the traditional trade that we had before,” he said, adding that Asia could take more than 50 percent of Iran’s exports. (…)

Iran says that an increase of its oil production will not cause a price crash. It expects other OPEC members to make way for extra barrels, but so far there is no sign that other OPEC members are willing to cut supply. (…)

Saudi oil sales to US lowest since 2009 Fall shows impact of shale boom and growing imports from Canada

(…) Saudi Arabia remains the second-biggest oil exporter to the US after Canada, and owns stakes in refineries and petrochemical plants in the country.

Oil exports to the US this year have been almost a third lower than during the same period last year, and have declined by about 400,000 b/d since 2012.

But they have strengthened since late March, weekly US government data show, indicating that the kingdom may not be prepared to give up on its share of the US market. (…)

The kingdom has been compensating for the loss of sales by accelerating its pivot towards Asia, with China vying with the US as one of the biggest buyers of Saudi crude. (…)

But China is a tough market: