U.S. Federal Reserve Chair Janet Yellen (C) watches a welding student as she tours City Colleges of Chicago, College to Careers Program in Advanced Manufacturing, at Daley College in Chicago, March 31, 2014.
Strong industrial production numbers reminded us that the U.S. economy remains in pretty good shape.
First, the scoreboard:
- Dow: 16,424.8 (+162.2, +1.0%)
- S&P 500: 1,862.3 (+19.3, +1.0%)
- Nasdaq: 4,086.2, (+52.0, +1.2%)
And now the top stories:
- Industrial production increased by 0.7% in March, beating expectations of a 0.5% gain. February's growth figure was revised up to 1.2% from an earlier estimate of 0.6%. "It is now evident that the negative effects of inclement weather were largely contained in January, when manufacturing output fell 0.9%, particularly within vehicles (-5.9%)," said Barclays' Peter Newland.
- According the industrial production report, the capacity-utilization rate jumped to 79.2% from 78.4% a month ago. This was much tighter than the 78.7% expected. "You talk about the output gap, unused resources out there?" wrote Bank of Tokyo-Mitsubishi's Chris Rupkey. "There is none looking at capacity utilization. The gap is closing. Capacity utilization rising a lot the last two months to 79.2% nearly back to the 80.5% average in 2007 before the recession."
- The Fed published its latest Beige Book of economic anecdotes. From the book: "Reports from the twelve Federal Reserve Districts suggest economic activity increased in most regions of the country since the previous report. The expansion was characterized as modest or moderate by the Boston, Philadelphia, Richmond, Atlanta, Minneapolis, Kansas City, Dallas, and San Francisco Districts. Chicago reported that economic growth had picked up, and New York and Philadelphia indicated that business activity had rebounded from weather-related slowdowns earlier in the year. The Cleveland and St. Louis Districts both reported a decline in economic activity."
- Many folks highlighted the fact that references to "weather" had fallen. "Roughly 60% of the 103 weather mentions in the April Beige Book were in a negative context; the rest were positive or neutral," noted LPL Financial's John Canally. "Almost all of the 119 mentions in the March Beige Book were in a negative context."
- Federal Reserve Chair Janet Yellen spoke to the Economic Club of New York about monetary policy and her views on the economy. "[T]he central tendency of FOMC participant projections for the unemployment rate at the end of 2016 is 5.2 to 5.6 percent, and for inflation the central tendency is 1.7 to 2 percent," she said. "If this forecast was to become reality, the economy would be approaching what my colleagues and I view as maximum employment and price stability for the first time in nearly a decade. I find this baseline outlook quite plausible."
- Here's Barclays' Michael Gapen: "We read this as a not-so-subtle signal that, although the committee has gradually begun to remove its outright commitment to low rates and balance sheet expansion, the Fed is in no hurry to accelerate the trend or initiate a rate hike cycle."
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