Manufacturing And Housing Starts Decline

Unexpectedly of course.

Output at U.S. factories slipped in March and builders started construction on fewer homes, offering cautionary signals for an economy that appeared to be gaining traction.

Manufacturing output slipped for the first time in four months, dropping 0.2 percent, the U.S. Federal Reserve said on Tuesday.

The decline dragged on overall industrial production which was unchanged and fell short of analysts' expectations.

"It looks pretty bad on the face of it," said Tom Porcelli, an economist at RBC Capital Markets in New York.

Surging exports and efforts by companies to restock their shelves have made economic growth look more solid in recent weeks.

The factory data did little to change that view, but economists said it suggested the recovery lost a little steam at the close of the first quarter, in part due to headwinds from Europe's debt crisis, which is weighing on global growth.

"(It) raises the possibility that the recent easing in global demand is starting to take a toll on U.S. manufacturers," said Paul Dales, an economist at Capital Economics in London.

Signs of a cooldown in growth became apparent earlier this month when a report showed hiring slowed sharply in March.

Although, to be fair, not everyone was surprised. Treasury Secretary Tim Geithner saw it coming.

Treasury Secretary Timothy Geithner said he believed the economy is “gradually getting stronger,” but said “we can’t tell yet” whether growth has stalled as it has in previous spring months during the Obama administration.

“We can’t tell yet,” Geithner said on “This Week” when asked if the same pattern from previous years was repeating, with strong growth in early months of the year, followed by a slow-down, as happened the last two years.

“But if you look back at what happened in 2010 and 2011, you’re right that you saw some early strength in the beginning of the year,” Geithner said. “But then what happened was, the crisis in Europe in 2010 and 2011 and then the crisis in Japan and then the oil shock caused growth to slow. And then in ’11, it was made worse by the – by all the political drama around the debt limit, which was very damaging to confidence.”