US industrial production rises on autos, machinery

Production at US factories increased in January, reflecting gains in demand for automobiles and business equipment that may keep manufacturing at the forefront of the expansion.

Output at factories rose 0.7 per cent after a revised 1.5 per cent gain in December that was the largest in five years, figures from the Federal Reserve showed on wednesday in Washington. A 2.5 per cent decline in utility output prompted by the fourth-warmest January on record caused total industrial output to be little changed, less than forecast.

Business investment in new equipment and the need to rebuild inventories will probably keep factory assembly lines rolling at the start in 2012. Nonetheless, Europe’s financial crisis and slowing growth in emerging economies like China threaten to temper orders for US goods.

“Manufacturing is doing pretty well,” said Tom Simons, an economist at Jefferies & Co Inc in New York. “It will continue to play a driving role in the economy. Global demand is holding up pretty well, we’re still rebuilding inventories and autos remain a significant leader in the factory recovery.”

Stocks rose after China said it will get more involved in trying to find a solution for Europe’s sovereign debt crisis. The Standard & Poor’s 500 Index rose 0.3 per cent to 1,354.58 at 9:35 am in New York.

Survey results
The median forecast of 81 economists surveyed by Bloomberg News projected total production would rise 0.7 per cent. Estimates ranged from gains of 0.1 per cent to 1.2 per cent.

The back-to-back increases in factory output were the biggest since July and August of 2009.

Capacity utilisation, which measures the amount of a plant in use, fell to 78.5 per cent last month from 78.6 per cent in December, which was the highest since July 2008, on wednesday’s Fed report showed.

Manufacturing in the New York region expanded in February at the fastest pace since June 2010, another report showed on wednesday. The Fed Bank of New York’s general economic index increased to 19.5 this month from 13.5 in January. The index exceeded all forecasts in a Bloomberg News survey. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut.

Auto production
Manufacturing accounts for about 12 per cent of the US economy. The Fed’s national report for January showed output of motor vehicles and parts jumped 6.8 per cent, on wednesday’s figures show. Manufacturing excluding autos and parts climbed 0.3 per cent following a 1.3 per cent December increase.

Production of business equipment increased 1.8 per cent, boosted by more output of computers and transportation gear.

Purchases of cars and light trucks climbed to an annualised rate of 14.1 million last month, the highest since the so-called cash-for-clunkers programme in August 2009 and the second-strongest since May 2008, according to Autodata Corp. Sales averaged 16.4 million in the two years before the last recession began in December 2007.

With the average age of cars and trucks rising to a record 10.8 years, analysts see pent-up demand boosting US sales to a third-straight annual gain in 2012, the longest streak since sales peaked in 2000.