Economy: Factory Production Increases, Housing Stagnates

Production at U.S. factories climbed in January for a fifth consecutive month, while builders began work on fewer single-family houses, showing the expansion remains driven by manufacturing as housing stagnates.

The Fed’s report also showed total production was unexpectedly restrained by a decline in utilities as milder temperatures curbed demand for heating. Output fell 0.1 percent after a 1.2 percent increase in December.

Mining production, which includes oil drilling, decreased 0.7 percent last month. Utility output fell 1.6 percent after a 4.1 percent increase the prior month.

Automakers are benefiting from rising sales. Output of motor vehicles and parts jumped 3.2 percent in January after rising 0.2 percent a month earlier.

Business Equipment

Production of business equipment rose 0.9 percent after a 1 percent gain. Output of computers and semiconductors rose 0.9 percent after increasing 1.5 percent.

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Economic Data Indicate Strength

A rise in productivity showed companies continue to keep costs controlled and offered hope for jobs growth, while disparate U.S. economic reports noted continued growth in the service and manufacturing sectors.

Productivity increased while labor costs fell for the second consecutive quarter at the end of 2010, though many economists expect that a stronger economy means that businesses won't be able to keep squeezing more output from the same workers.

"There is a good chance that productivity will slow further this year, as firms are increasingly forced to hire more workers to expand output," said Paul Ashworth, chief U.S. economist at Capital Economics.

Nonfarm business productivity rose at a 2.6% annual rate in the October to December period after rising by a revised 2.4% in the third quarter, the Labor Department said Thursday. For the full year, productivity was up 3.6% in 2010 and 3.5% in 2009.

http://online.wsj.com/article/SB10001424052748703652104576121843066398666.html?mod=WSJ_economy_LeftTopHighlights

U.S. Manufacturing Expected to Grow in January

Manufacturing in the U.S. probably grew in January for an 18th consecutive month as the expansion strengthened at the start of the year, economists said before a report.
The Institute for Supply Management’s factory index was little changed at 58 last month from an eight-month high of 58.5 in December. Readings greater than 50 signal growth. A separate report could show construction spending rose 0.1 percent in December.
The manufacturing index reached 60.4 in March 2010, the highest point in nearly six years, as industrial output rose and helped the economy rebound. The index bottomed out at 33.3 in December 2008, the lowest point since June 1980.
A reading of 58, while lower than the previous month, would still signal solid growth at U.S. factories. Greater consumer spending on cars, household appliances and furniture, among other goods, has given manufacturers a boost. Manufacturers actually added 136,000 jobs last year, the first annual net employment gain for the sector since 1997.
Consumer spending rose 4.4 percent in the October-December quarter, the fastest pace in four years, the Commerce Department said last week. The economy grew at a 3.2 percent annual rate in that same period. Despite manufacturing’s strength, economists don’t expect the sector will do much to reduce the nation’s 9.4 percent unemployment rate.
Also at 10 a.m., the Commerce Department will release data on construction spending. Projections in the Bloomberg survey ranged from a drop of 1.3 percent to a gain of 0.5 percent, following a 0.4 percent increase in November.

Alliance for American Manufacturing calls for access to capital and trade deficit reduction.

Industry Group Urges President Obama to Adopt Manufacturing Strategy in 'State of the Union' Agenda

As President Obama prepares to report to the nation on the State of the Union, the Alliance for American Manufacturing has sent a letter urging him to renew his focus on the challenges and opportunities facing American manufacturers and their workers. 

"American manufacturing is in crisis mode," said AAM Executive Director Scott Paul. "In his State of the Union address, we're asking the President to announce a comprehensive national manufacturing strategy that can revitalize our industrial base and ensure a wider economic recovery."

AAM's letter to the President outlines five key areas of a national manufacturing strategy that should be delineated in the State of the Union:

*Access to capital
*Creating demand and promoting manufacturing utilization
*Workforce development
*Competitiveness
*Trade deficit reduction

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http://industryweek.com/articles/industry_group_urges_president_obama_to_adopt_manufacturing_strategy_in_state_of_the_union_agenda_23663.aspx

September Machine Tool Consumption Up 157% Over ’09

September’s machine tool consumption totaled $339.76 million, up 156.8% compared with the total of $155.69 million for the same month in 2009. That puts the year-to-date total at $2,090.27 million, up 74.1% compared with the same YTD figures in 2009.
This comes from the U.S. Manufacturing Technology Consumption Report is compiled by the American Tool Distributors’ Association and The Association for Manufacturing Technology.
“September 2010 was a watershed in the recovery from the recession of 2008-2009,” said Peter Borden, AMTDA President. “The 1,992 units sold (in September) is the highest number since September of 2008 and demonstrates the resilience and staying power of the U.S. manufacturing base. More remarkably, this was done while many factories are running below the capacity levels that require capital goods purchases, despite the tight credit, and in spite of questions about government debt and potential tax increases. The catalysts of the successful IMTS, the weaker dollar, and the passage of bonus depreciation paid surprising and long awaited dividends.”
By region, Northeast consumption stood at $64.44 million, 66.3% higher than August’s $38.76 million and 77.4% higher that the September 2009 total. A year-to-date total of $362.73 million was 53.4% more than the same figure for 2009.
The Southern Region’s manufacturing technology consumption totaled $66.85 million, up 119.9% when compared with the $30.4 million total for August and up 389.4% when compared with September a year ago, the report noted.
For the Midwest, consumption was 49% more than August’s $81.75 million and up 157.6% when compared with last September. The $629.19 million 2010 YTD total was 84.4% above the 2009 total at the same time.
The Central Region saw manufacturing technology consumption climb to $114.99 million, 77.0% more than the August total, and 238.3% higher than the total for September 2009. With a YTD total of $561.03 million, 2010 was up 94.0% compared to the same period in 2009.
The Western Region also saw an increase in consumption, with a total of $31.68 million in September (up 27.5%), compared to August’s $24.84 million. At $228.66 million, 2010 YTD was 36% higher than the comparable figure a year ago.

U.S. Manufacturing Powers Up in October

Unexpectedly, manufacturing unexpectedly picked up steam in October, raising hopes for a strong final quarter that could underpin a flagging economic recovery, a key industry survey showed on Nov. 1.

The Institute of Supply Management (ISM) said its survey of purchasing managers nationwide revealed strong gains in new orders and production, pushing up its index to 56.9%, from 54.5% in September.
The surge was much stronger than a dip to 54% expected by most analysts.

"The ISM index posted a surprisingly strong rebound in light of the report last week that the general economy remains in a growth slump," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "The important reason for the October rebound is the reversal of the trade situation.  Export growth reportedly surged while import growth backed off. In other words, less domestic spending was drained away to support foreign manufacturing and more production was directed to domestic producers. 
"Manufacturers have experienced parts availability problems for the last six months and  have been slow to ramp up production allowing imports to fill the void," he added. "The ISM report suggests that, at last, the import surge in manufactured goods may be subsiding with all the beneficial side effects (rising orders, production, and employment). Today's ISM report is good news for U.S. manufacturing."
Manufacturing activity has expanded for 15 consecutive months but momentum had been slowing since April. The October jump suggested new life in the sector that has been a key driver of the recovery after recession officially ended in June 2009.
"This month's report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter," said Norbert Ore, head of the ISM's manufacturing business survey committee.

Copyright Agence France-Presse, 2010