The Weekend Economic Wrap Up

By March 18, 2007Economy

Business is UpLast Friday, the Federal Reserve report on industrial production (IP) showed that overall industrial activity increased a strong 1 percent n February. This was the strongest gain in fifteen months. Is this an indication that the soft patch may be coming to an end? Not likely. The rise in IP was mainly due to a 7 percnet surge in utilities output due in-part to unseasonably cold weather last month.

Outside of computers and electronic production and motor vehicles, manufacturing production remained unchanged. Coming on the heals of declinign four out of the previous five months, stagnant growth in non-motor and non-high tech manufacturing is a pretty solid indication the economy remains mired in a sluggish state.

Wood products, nonmetallic minerals and furniture production all posted significant production declines last month. This shows that the ongoing downturn in the housing continues to have a major impact on manufacturing sectors closely related to the construction industry. This, combined with an excess inventories and a deceleration in purchases of capital equipment by business, will together stifle the manufacturing expansion during the first half of this year.

Also flast Friday, the Labor Department reported today that consumer prices increased by 0.4 percent in February. The good news is that beyond spikes in energy and food prices, the core-CPI only edged up 0.2 percent, a deceleration from the previous month. This is a good signal that underlying inflation remains contained.

Next week, the Commerce Department reports on housing starts and building permits for February..this should give us a good indication as to the current status of the housing downturn. Stay tuned….