U.S. Industrial Sector Shows More Decline
Other early Friday reports had mixed implications for the industry.
The U.S. Commerce Department said housing starts fell during February. However, the level remained fairly stable after a big gain in January.
And the Labor Department said producer prices rose slightly, to indicate little inflation pressure but also tepid retail demand for products.
Housing construction affects flatbed carriers that haul construction material, but can affect demand for dry van freight like household appliances and furniture.
Tame wholesale prices can help by giving the Fed more leeway to aggressively cut interest rates without worrying about pushing inflation higher. However, flat prices at the producer level can also mean consumers are not buying goods off store shelves very fast.
Total industrial output – counting factories, mines and utilities -- fell 0.6% in February, and businesses operated at only 79.4% of maximum capacity, their slowest since February 1992. The decline was double what analysts were expecting.
Manufacturing output alone fell 0.4% during the month, and is down 2.5% since September. According to Reuters, many analysts concede that this sector is stuck in recession.
Also, February production of transit equipment fell 0.8%, the Fed said, due to further cuts in the assembly of medium and heavy trucks.
ommerce said housing starts fell 0.4% in February to a seasonally adjusted annual rate of 1.647 million units. Starts had risen a sharp 4.8% in January amid two big cuts in interest rates by the Fed.
Labor said that wholesale prices rose just 0.1% in February, following a big 1.1% rise the month before that most economists had dismissed as a onetime spike. Higher prices for natural gas and energy products were offset by the lower costs for cars and trucks.
The small advance in the Producer Price Index (PPI), which measures inflation pressures before they reach store shelves, was on target with estimates. With little inflation fears currently, financial markets expect the Fed to cut interest rates by 0.75% when the Fed’s policy committee meets on Tuesday.
Also, a study by the University of Michigan released Friday showed that consumers are more upbeat about their financial situation this month than they were in February.
