Industrial production needs to pick up the pace
Industrial sector readings are important indicators of an economy’s level of economic activity. Industrial production is a prime driver of employment and output, which is crucial for economic growth. Since industrial data have such vast implications, investors in all sectors of the economy eagerly anticipate this indicator.
Although the manufacturing sector in the United States has come a long way from its recessionary lows, growth in the sector continues to stagger at its own pace. The Federal Reserve Board released industrial production data for February. The data indicated that industrial production edged up by 0.1% in February against the expected 0.3%.
Utilities gain, mining dips
In February, industrial production in the United States was supported largely by a 7.3% gain in the utilities sector while mining dropped 2.5%.
Dominant US players in the utility sector include AES Corporation (AES), Public Service Enterprise Group Inc. (PEG), and Sempra Energy (SRE). Stocks for these companies have returned about 3.18%, 3.98%, and 2.32%, respectively, over the past month.
These companies commanded a 1.45%, 3.82%, and 4.62% portfolio weight, respectively, in the utility sector tracking the Utilities Select Sector SPDR Fund (XLU) as of March 16, 2015. They are also part of the S&P 500 index tracking the SPDR S&P 500 ETF (SPY) in which they commanded 0.04%, 0.11%, and 0.13% portfolio allocation, respectively, as of March 13, 2015.
Manufacturing slowed, capacity utilization edged down
Manufacturing slowed in February, recording a 0.2% dip from January’s readings. Manufacturing fell by 0.3% in January 2015. Both industrial and manufacturing readings came in worse than market expectations. Overall capacity utilization stood at 78.9%, down from the January reading of 79.1% and below median expectations of 79.5%.
Meanwhile, in Europe, investors are preferring stocks to bonds. Read on to know why.