Reuters reported that US factory output slipped for the first time in 10 months in April 2011 as a shortage of parts from Japan crimped activity and home building slumped, showing the economy got off to a weak start in the second quarter.
Signs of lackluster economic activity were also evident in declining sales at Wal Mart Stores, which said its customers were still living from paycheck to paycheck. Home Depot also reported a drop in sales while Hewlett Packard cut its 2011 profit forecast.
US stocks mostly fell on concerns about the economic recovery. The Dow Jones industrial average dropped 68.79 points or 0.55% to 12,479.58 and the Standard & Poor's 500 Index dipped 0.49 of a point or 0.04% to end at 1,328.98.
Analysts are cautiously optimistic the economy will regain speed this quarter after growth slowed to a 1.8% annual pace in the January to March 2011 period, but some doubt that growth will pick back up to an annualized rate of 3%.
Mr Ryan Sweet, a senior economist at Moody's Analytics in West Chester, said that "It's a sluggish start. Since the beginning of this year, the recovery seems to have hit a bit of a soft patch, but conditions should improve for the remainder of this year."
Mr Cary Leahey MD and senior economist at Decision Economics said that the economic data added to the market's sense that the economy is in a slower growth mode. He added that "Whatever rebound is unfolding in the second quarter will fall short of 3% growth and if growth falls short of 3%, the Fed will be disappointed and will postpone taking even baby steps toward tightening monetary policy."
The Federal Reserve said that manufacturing output fell 0.4%, breaking nine straight months of gains, as supply disruptions from Japan's earthquake hit auto production.
Overall industrial production was flat, with gains in mining and utilities offsetting the drop in factory output. Excluding cars and parts, manufacturing output rose a sluggish 0.2%.
A separate report from the Commerce Department showed groundbreaking for new housing dropped 10.6% to an annual rate of 523,000 units as a glut of homes on the market discouraged new projects. Though March's housing starts were revised up substantially, it was not enough to soften the blow from last month's drop.
(Sourced from www.reuters.com)
