United States: Manufacturer’s Recovery Slowed by Supply Problems

In April, industrial output in the United States increased by 0.7 percent, falling short of the industry consensus of 1%. According to analysts, production is already lagging behind demand, and as shortages become more widespread, the situation may exacerbate in the following months.

Manufacturing production increased a modest 0.4% MoM in April, but was constrained by a 4.3% MoM drop in auto production as the global semiconductor shortage did begin to shrink.

The deficit now extends not only to semiconductors, but also to raw materials, other intermediate resources, and, judging by the very high number of vacancies in production, also to the labor force. As a result, we expect these broader supply constraints to hold back industrial recovery this year.

Industrial production rose 0.7% MoM in April, as mining rose 0.7% MoM and utility production posted a 2.6% MoM increase due to weather conditions to more than normal level. Overall, the recovery in production continues to lag far behind consumption, and as the deficit becomes more acute and widespread, this situation will only get worse in the coming months.

United States Dollar Stays Limited, Impacted by Market-Wide Bias

Following worse-than-expected United States results, the dollar plunged on Friday. In April, retail sales grew by zero percent, down from 10.7% the previous month, while the core reading dropped 1.5 percent. In addition, the preliminary estimate of the Michigan Consumer Sentiment Index for May was 82.8, down from 88.3 in April and the anticipated 90.4. In April, Industrial Production increased by 0.7 percent.

The possibility that the US Federal Reserve will need to strengthen its monetary policy in response to rising inflationary pressures has faded, to the disadvantage of the US dollar. Stocks are on the rise, while government bond yields are falling.

The majority of the dollar’s competitors gained ground, with EUR/USD and GBP/USD set to boost their gains. The Australian dollar is the weakest among commodity-linked currencies, while the Canadian dollar is the highest. Chinese data will put the market’s upbeat mood to the test at the weekly open. The country will release April Retail Sales and Industrial Production figures, both of which are estimated to have grown at a lesser speed than in Mar.