Bottom? What bottom?

April 15, 2009
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Industrial Production: No hint of a turn
March industrial production drops a more-than-generally-expected 1.5% (Consensus: -0.9%; Decision Economics: -
1.5%), from a minimally revised February level.
Within the total, manufacturing output dropped 1.7%, mining activity ell 3.2%, and utility output rose 1.8%. The
auto industry was a minimal factor in the manufacturing decline, with factory output excluding motor vehicles and
parts dropping 1.9%, across virtually all industries.
Thus, there was no hint that the process of inventory liquidation is drawing to a close. When it does, production
can be expected to bounce back up to meet the pace of sales--at whatever depressed level that may be. The turn will
not be pre-announced, and might happen at any time--but the strong downward momentum of output, and the
still very uncertain trend of final sales, suggest that the moment is not too near.
Ongoing big output declines expand industrial slack capacity (with the manufacturing utilization rate falling 1.1
points), and can lead to further employment cuts. Those trends generally argue for an increasing downward pull
on goods prices--which may, already, be in outright decline.




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