A Busy Day: The Current Account, Industrial Production, Oil, and Housing

Shocking news -- the current account deficit is still big.  OK, bigger than expected, and getting bigger.  The report from Bloomberg:

The dollar fell more than a cent against the euro and dropped versus the yen after a government report showed the U.S. current account deficit grew more than forecast in the fourth quarter.

The gap was a record $187.9 billion, from a revised $165.9 billion in the third quarter, the Commerce Department said. The median forecast of economists polled by Bloomberg was for a deficit of $183 billion.

And stating the arithmetically obvious:

"Bottom line is that the current account deficit is huge, and it will require large amounts of inflows into U.S. assets to help support the currency,'' said Enrico Caruso, chief trader at currency hedge fund Tempest Asset Management in Newport Beach, California. "And we don't know if we are going to continue to see large inflows, especially from Asia.''

So, of course, we hear this:

"Asian demand was lower,'' said Michael Malpede, senior currency strategist in Chicago at Refco Group Ltd. "There's a danger that the rug could be pulled out from under the dollar at any time.''...

"There is widespread recognition that the ongoing trade imbalance between Asia and the U.S. -- that is, Asian savings financing U.S. consumption -- can't be sustained and could potentially pose a systemic risk to the global financial system,'' said Yoon, chairman of South Korea's Financial Supervisory Commission.

Yes, yes.  We know.  Meanwhile, the Federal Reserve's report on industrial production and capacity utilization for February is in:

Industrial production increased 0.3 percent in February after an upwardly revised gain of 0.1 percent in January; the increases in November and in December were also revised up slightly. In February, manufacturing output rose 0.5 percent, the output of mines advanced 0.2 percent, and the output of utilities fell 1.1 percent.  At 118.4 percent of the 1997 average, overall industrial output in February was 3.5 percent above its February 2004 level.  The rate of capacity utilization for total industry in February rose 0.2 percentage point, to 79.4 percent, a rate 1.6 percentage points below its 1972-2004 average.

Here's a nice breakdown of the data, from MarketWatch (via Investors.com):

Breaking down the output data, consumer goods production rose 1.1 percent in February, after falling 0.5 percent in January.

Output of consumer durable goods rose 3.6 percent, boosted by a gain in the output of automotive products and a jump in home electronics.

Output of motor vehicles and parts rose 5.1 percent last month, a reversal after falling 1.5 percent in January. Excluding automobiles, industrial production would have been flat in February.

Output of high technology goods increased 1.5 percent.

Output of U.S. utilities fell for a second straight month, down 1.1 percent in February after a drop of 2.8 percent in January.

February's mining output rose 0.2 percent, while manufacturing output rose 0.5 percent for the third straight month.

Generally, the news didn't make much of a splash.  Yet another (nominal) record on oil prices did, though.  From CNNMoney.com:

Oil prices hit a record high Wednesday after a report showed  sharper-than-expected declines in gasoline and heating oil inventories.   

Crude oil for April delivery jumped $1.41, or 2.6 percent, to close at $56.46 a barrel in New York, after reaching as high as $56.60 -- well above the previous record close of $55.17 set on Oct. 22 and the record trading high of $55.67 set on Oct. 25.

Apparently this is getting serious.

In a news conference Wednesday, President Bush said he was "concerned about the price of energy" and its dampening effect on the economy.

"Demand is outracing supply and supplies are getting tight," Bush said.

On the heels of Bush's statements, the Senate voted, 51 to 49, to open up the possibility of drilling in the Arctic National Wildlife Refuge (ANWR) in northeastern Alaska.

The housing market keeps cruising along, though.  Here's the Bloomberg notice of the Commerce department release:

U.S. home construction unexpectedly rose to a 21-year high in February, a government report showed, suggesting low mortgage rates are still fueling demand...

The pace of sales surpassed all estimates in the Bloomberg survey. Forecasts ranged from a 1.9 million rate to a 2.15 million pace. Starts for all of last year totaled 1.96 million, the most since 1978.

The regional breakdown was kind of interesting.

By region, starts rose 20.4 percent in the Midwest to 408,000 at an annual pace, the fastest since November 2003; 19.1 percent in the Northeast to 193,000; and 0.7 percent in the West to 552,000. They fell 8.1 percent in the South to 1.042 million.

And the sentiment still seems to be that things are just bound to moderate.

Building permits, an indicator of future construction, fell 2.7 percent to 2.074 million units at an annual rate, after rising 3 percent the previous month...

The National Association of Realtors said March 14 it expected existing-home sales to decline 3.1 percent this year to 6.57 million from a record 6.78 million in 2004. It said new home sales would total 1.13 million, down 5.8 percent from the record 1.2 million of last year, while housing starts would drop to 1.94 million units.         

"After setting four consecutive record years, the housing market is due for a breather,'' said David Lereah, the Realtors group's chief economist.         

Wow.  That's a lot of news for one day.  I'm exhausted.

UPDATE: The Capital Spectator remains the best blog going on all things oil market.  The latest can be found here.  Also, Angry Bear and William Polley take note of the current account news (here and here, respectively).

UPDATE II: More on capacity utilization over at William Polley's blog.