Industrial Production in U.S. Rose 0.9% in January
Industrial production in the U.S. rose more than forecast in January, indicating factories were leading the recovery entering the new year.
Output at factories, mines and utilities climbed 0.9 percent after a 0.7 percent increase the prior month, figures from the Federal Reserve showed today in Washington. Manufacturing gained 1 percent as factories produced more consumer goods and business equipment.
Investment in new equipment will probably be sustained in coming months as companies take advantage of the global recovery. Growing overseas demand and efforts to replenish stockpiles will help keep factories expanding and may generate the jobs needed to boost consumer spending.
“The trend in output is up pretty solidly,” Jim O’Sullivan, global chief economist at MF Global Ltd. in New York, said before the report. “Part of the strength is the inventory cycle, but final sales are improving. Consumer spending seems to be growing again.”
Economists forecast industrial production would increase 0.7 percent, according to the median of 78 projections in a Bloomberg News survey. Estimates in the survey ranged from gains of 0.3 percent to 1.4 percent.
An earlier report today from the Commerce Department showed housing starts in January rose 2.8 percent to a 591,000 annual pace, faster than anticipated. Building permits, a sign of future construction, fell 4.9 percent to a 621,000 pace.
Stock-index futures maintained gains after the reports. Futures on the Standard & Poor’s 500 Index expiring in March rose 0.5 percent to 1,098.6 at 9:21 a.m. in New York.
Capacity utilization, which measures the proportion of plants in use, increased to 72.6 percent, as forecast, from 71.9 percent, today’s Fed report showed. The plant use rate averaged 80 percent over the past two decades and reached a record low 68.3 percent in June.
Production of business equipment increased 0.9 percent as demand for computers and electronic equipment rose, a sign investment is picking up. Output of consumer goods rose 1.1 percent, and construction supplies increased 1 percent.
Cisco Systems Inc., the biggest maker of networking equipment, is among companies planning to hire. The San Jose, California-based firm this month predicted sales will accelerate and said it will boost its workforce by as much as 3,000 as customers resume spending to deal with surging data traffic.
“Almost every country is saying their momentum is better than it was before, and almost every business is saying it’s more optimistic,” Chief Executive Officer John Chambers, 60, said in a Feb. 4 interview. “It shows a capital spending trend that’s hard to deny, on a global basis.”
Utility output rose 0.7 percent. January temperatures were 0.3 degrees Fahrenheit above the long-term average, compared with colder-than-normal weather in December, according to the National Oceanic and Atmospheric Administration.
Mining output, which includes oil drilling, increased 0.7 percent. Motor vehicle and parts production rose 4.9 percent following a 0.3 percent decline the prior month.
Automakers are boosting production to rebuild depleted inventories, according to Rebecca Lindland, director of auto research at IHS Global Insight in Lexington, Massachusetts.
Ford Motor Co., the only major U.S. automaker to avoid bankruptcy, plans to boost first-quarter North American production by 58 percent from a year earlier to 550,000 vehicles.
Eaton Corp., the maker of hydraulics and automotive valves, is seeing demand increase in its auto and trucks unit, as is typical early in an economic cycle, Chief Executive Officer Sandy Cutler said last week in an interview from company headquarters in Cleveland.
The company forecasts it will capture about $1 billion in stimulus funds as the federal government rebuilds housing on military bases and aims to improve efficiency in federal buildings. The Obama administration’s $787 billion stimulus program is boosting infrastructure and green energy spending, and the government says it has funded as many as 2 million jobs.
Private surveys have also signaled manufacturing is recovering. The Institute for Supply Management’s factory index on Feb. 1 showed the fastest pace of expansion in January since 2004.
Efforts to stabilize inventories accounted for 3.4 percentage points of the fourth quarter’s 5.7 percent pace of economic growth, according to figures from the Commerce Department.
Factories are also benefiting from rising exports as global demand recovers after the worst slump since World War II ended. A 10 percent drop in the value of the dollar from a four-year high on March 3 against its major trading partners is making American goods more competitive. Exports have risen for eight consecutive months since reaching a three-year low in April.