WASHINGTON: US industrial output rose at its fastest clip in 3-1/2 years in the fourth quarter as factory activity closed out the year on a strong note, a sign of the economy’s brightening prospects.
Manufacturing production rose a stronger-than-expected 0.4 percent in December after an out-sized 1.0 percent increase the prior month, a Federal Reserve report showed.
That helped push overall output at the nation’s factories, mines and utilities up 0.3 percent last month. Economists polled by Reuters had expected factory output to rise 0.3 percent, while the gain in overall industrial production matched forecasts.
“It adds to the evidence that the fourth quarter was a good one,” Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. “It also provides further evidence that the slowdown in employment growth in December was a fluke.”
For the fourth quarter as a whole, industrial production advanced at a 6.8 percent pace, the largest quarterly increase since the second quarter of 2010.
Fourth-quarter growth is shaping up to be far stronger than economists had anticipated, with estimates ranging as high as a 3.9 percent annual rate. But that does not seem to have inspired US households.
A separate report showed the Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment slipped to 80.4 early this month from 82.5 in December.
Job growth slowed sharply in December, largely blamed on cold weather that blanketed large parts of the country. At the same time, incomes barely grew, sapping household morale.
Frigid temperatures also helped to put a dent in homebuilding last month. Groundbreaking for new homes dropped 9.8 percent to a seasonally adjusted annual rate of 999,000-unit pace in December, another report from the Commerce Department showed.
It was the largest percentage decline since April, but housing starts were coming off a six-year high reached in November and the decline was smaller than economists had expected. For all of 2013, starts increased 18.3 percent to an average of 923,400-units, the highest since 2007.
“We suspect weather played a large role in the soft headline number and some of the weakness could be payback for the strong November print,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
“With weather and the seasonal adjustment process likely pulling the headline lower, we could see another soft print in January. Even if we see two successive downbeat months it does not mean the housing recovery has faltered.”
Groundbreaking for single-family homes, the largest segment of the market, fell 7.0 percent to a 667,000-unit pace in December. Starts for the volatile multi-family homes segment declined 14.9 percent to a 332,000-unit rate.
Reuters
