- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
- Long Term Employment Shifts Caused by the Pandemic
- Earnings Provide Positive Surprise Despite Pandemic
- Renewable Energy Under Fire in Texas
- Yellen Aims for Full Employment
- Minimum Wage Research in the Spotlight as a Hike Looks Inevitable
- Non-Residential Construction Soft in the Pandemic Economy
- Views on Interest Rates and the Move in Treasury Yields
- Inflation Indicators Healthy but Still on the Rise
- Risky Assets Sell-off Despite Optimistic Economic Outlook
- The Latest on Vaccinations and What it Means for Growth
- Highlights of the Fed's "Economic Well-Being of U.S. Households in 2020" Report
- Relative Factors and Forward Change in Federal Funds Rate
- Can Wage Growth Keep Up With Inflation?
- With That, We Carry On
- Supply Pressures Looking to Peak
- Cars are Still Expensive, Workers are Still Needed
- Recovery Continues, but Delta Looms
- Fed Eyes Tapering While China Sees a Setback
- Review the Fed Previews
- No Tapering Yet
- Labor Day on Labor Day
- Delayed or Disappearing Growth?
- Supply and Demand Mismatch will be Evident during the Holiday Shopping Season
- Workers Find Leverage in a Tight Labor Market
- Cautiously Optimistic
- Sour Expectations Take Down the Market
- Q3 Earnings Were Surprisingly Good
- Inflation Weights on Bonds and Consumer Sentiment
- FOMC Tapers While Trade and Employment Flash Mixed Signals
- Inflation is Getting Broader, Not Cooler
- Unemployment Insurance During the Pandemic
- A Year of Normalization
- What Will GDP Growth Look Like in 2022?
- Student Loans Targeted by the Biden Administration
- The Chicago Fed Index Reverses in July
- Chinese Economic Data Faltered in July
- Stellar Jobs Report Bucks Recession Fears
- Bank of Japan Punished for Dovish Policy Stance
- Expect 75 Today
- Manufacturing Weakness in Germany has Implications for Euro Area Growth
The US Economy is All Right
April 17, 2022
As we all know, the war in Ukraine has surfaced as the primary threat to global growth in 2022. The already inflammatory issues of inflation and supply chain disruptions are expected to worsen for most of the world if not all of it. With the beginning of the conflict taking place at the end of February, all eyes are on March and April economic data to see the initial impact. A first glimpse suggests the impact may be minimal in the US.
Industrial Production Maintains Strong Monthly Pace in March
Industrial production data for March came out on Friday with a strong monthly print of 0.9% MoM. This was the third straight monthly gain of 0.9-1.0% and the second straight for the manufacturing sector. Total capacity utilization also surfaced above 78% for the first time since January 2019 and exceeded the pre-pandemic reading by 2.0 ppts. US industry seemed to be operating normally in March without any disruptions added from the war. Instead, the expansion of industrial capacity continues at a rapid pace to keep up with excess demand.
The rise in energy prices has been the aftershock of the Russian invasion and sanctions that has shaken the US economy, and the industrial production report does reflect that. Oil and gas drilling production saw a strong 4.8% MoM increase in March following three monthly gains of 4.0% or more. This strength helped boost the mining subindex which grew 1.7% MoM. The good news is oil and gas drilling production is up 53.7% YoY after Q1 2022 which bodes well for the cooling of US gas prices. The strong response from oil and gas firms to higher prices dashes fears that they would be unwilling to ramp up production in the face of fundamental changes within the industry.
Empire State Manufacturing Survey Activity Surges in April
The first of many Fed manufacturing PMIs for April also came out last week describing firms' activity in the New York State, the Empire State Manufacturing Survey. These responses were received in the first week of April, about a month and a week from the beginning of the war in Ukraine. The General Business Conditions index saw a huge bounce from -11.8 to 24.6 boosted by a 36.3 pts jump in the New Orders index and a 41.9 pts jump in the Shipments index. This meant firms in New York reverted from a slight contraction in demand and production in March to a strong pace of growth in April. If the negative March numbers were representative of the effects of the war in Ukraine, they were very temporary.
If manufacturing firms did see an expansion in production and stronger demand, they saw it at with higher input inflation. The Prices Paid index accelerated to its higher reading of all time in April at 86.4. This was a jump of 12.6 pts from an already elevated reading of 73.8 in March. This was likely due to the surge in energy prices reported throughout March, a consequence of the Ukraine-Russia conflict that will continue to be cited. The situation has also lead to a worsening in optimism for the next 6 months. The forward-looking General Business Conditions index fell -21.4 pts but remained in positive territory at 15.2.
It seems that so far the US economy is doing all right. Of course, there is a lot of data to come through to help better describe the consequences of the war across the globe, but the above two reports suggest positive surprises on the way. This trend would be pleasant news for the FOMC board who is planning a path of policy normalization for the rest of the year. Avoiding potential snags in the next few months could mean the difference between slow growth and a full on recession as the Fed funds rate rises.