Industry data show modest recovery
By Jeannine Aversa
WASHINGTON Industrial production at the nation's factories, mines and utilities rose by just 0.1 percent in December, slowing from the previous month's big increase.
The gain, reported by the Federal Reserve yesterday, followed a revised 1 percent November jump, stronger than previously estimated and the biggest in four years.
Economists were expecting industrial production to cool off a bit in December to a 0.5 percent increase. But the gain still marked the fourth straight month that production expanded.
Earlier this week, the Fed, in a more forward-looking survey of business conditions, found the economy gaining momentum, with growing signs that the battered manufacturing sector was beginning to pull out of its nosedive.
Production at factories the biggest chunk of industrial activity tracked by the Fed rose by a modest 0.3 percent in December, down from a 1 percent gain the previous month. Output at mines was flat, after rising 0.6 percent in November. Production at utilities sank by 1.4 percent, erasing the same-sized gain the month before.
"When you put all the data together, it shows that a moderate manufacturing recovery is sustainable and is continuing," said Clifford Waldman, economist at the Manufacturers Alliance/ MAPI, a research group.
Stocks rose on Wall Street. The Dow Jones industrials gained 46.66 points to close at 10,600.51, the highest close since March 19, 2002.
In other reports, consumer confidence soared in January to its highest level in three years, lifted in part by the stock market's turnaround. A preliminary reading of the University of Michigan's index of consumer sentiment showed a jump to 103.2 from 92.6 in December.
The Commerce Department reported that American businesses increased their stockpiles by a modest 0.3 percent in November, a sign that companies are betting the rebound will last. Sales rose 0.5 percent.
Inventory building adds to economic growth as measured by the gross domestic product, the value of all goods and services produced in the United States. GDP is the broadest measure of the economy's health. Big cutbacks by companies in their inventories was a key factor in the economy's slump.
After a long bout of lackluster activity, the economy shifted into higher gear in the second half of last year. Analysts are hopeful businesses will feel even better about prospects and ramp up inventories and hiring.
Businesses' reluctance to go on a major hiring spree has been a sore spot for the economy. In
December, the economy added a paltry 1,000 jobs, disappointing analysts. The nation's unemployment rate dropped to 5.7 percent, mainly because thousands of people gave up looking for jobs.
Economists expect the Federal Reserve will keep interest rates at 1 percent, a 45-year low, when it meets Jan. 27-28.
With inflation low, the Fed has leeway to keep rates near rock-bottom levels for some time in an effort to help the labor market heal, economists say.
Some economists believe rates will stay low for the rest of 2004 and into 2005. Others believe that the Fed could start pushing up rates later this year.
The economy grew at a blistering 8.2 percent rate in the third quarter of 2003, the strongest performance in nearly two decades. Analysts believe that the economy expanded at a rate of 4 percent to 5 percent in the final quarter of the year.