Indicators released in the US this morning showed a further slide in the manufacturing sector of the nation following a surprise downside move in the Empire Manufacturing reading to a new low of -38.23, from -34, and continuing downside in Industrial Production and Capacity Utilization. Decline in these indicators points to a deepending recession that has yet to bottom and further pressure in the US economy for much of 2009. Despite comments made by Bernanke on the positive expectation for 2010, and rising equity markets, investors remain wary of a quick turnaround. The EUR/USD pair has seen significant action this morning and rose above 1.30, partially on the readings but more significantly on the increase in risk appetite.
[B]Industrial Production[/B] came in at a decline of 1.4%, just above the consensus estimate for a 1.3% decline. The previous reading for January was also revised a tenth lower to a -1.9% move. The continuing contraction, the 4th consecutive monthly decline, points to further weakness ahead as the US recession worsens. Although Investors remain wary of the impact of weakening demand and trade following the financial and housing crisis of 2008, the contraction is overshadowed this morning by positive comments from politicians and financial leaders.
[B]Capacity Utilization[/B], a reflection of growth and demand in the economy, fell further to 70.9% from 71.9% in January; economists polled by Bloomberg had expected the indicator to fall to 71.0%. Utilization has fallen severely since hitting a peak of 81.1% in August 2007. The continuing drop is a foreshadowing of further declines in capital expenditure and a declining outlook as businesses cut production amid weakening consumer spending.