U.S. Industrial Production Up 0.6% for Month : Retail Sales Reported Off 0.1%, but Figure Doubted
The nation’s industrial production expanded by 0.6% in December, the largest such increase in five months, the Federal Reserve Board reported Tuesday. And in a separate economic report, the Commerce Department said that retail sales for the month declined 0.1%--a statistic that analysts consider more promising than it might have appeared at first glance.
Reagan Administration officials and private economists alike quickly claimed that both reports added up to more good news for the economy.
At the White House, spokesman Larry Speakes called the reports “very encouraging for the year ahead.” He declared in a statement: “The economic record in industrial production and retail sales for 1984 is an indication that continued economic growth is in store. . . . Coupled with declining interest rates, this speaks well for the American economy.”
‘Very Bullish Statistic’
Increases in industrial production were recorded in every category except one, the Fed found. The only decline was a 0.9% drop-off in utilities, attributed to falling electricity generation during a month of unseasonably mild weather.
“The industrial production increase was a very bullish statistic,” declared Roger Brinner of Data Resources, Inc., an economic forecasting firm in Lexington, Mass.
Indeed, the gains were the largest since an overall 0.9% increase last July. They included a 0.9% expansion in the production of defense equipment and an increase in domestic auto production from an annual rate of 7.9 million units in November to 8.1 million in December.
The Fed also reported a slightly larger increase in unit sales of new domestic autos from an annual rate of 7.2 million in November to a seasonally adjusted rate of 8.1 million in December--a statistic that took on added significance in light of the figures contained in the retail sales report.
The showing of a slight decline in retail sales, economists agreed, was wholly caused by a preliminary Census Bureau finding of a 2.3% drop in auto sales for the month. But the Census Bureau figure was contradicted by other reports--including the Fed’s--that showed a strong December surge in sales of new U.S.-made cars, analysts agreed.
Without the inclusion of the decline reported by the Census Bureau, December sales--which totaled $110.8 billion--would have increased 0.5%, the Commerce Department said. The overall slight decline of 0.1% was the first since a 0.8% drop in August, the department said--although retail sales for all of 1984 were up 10.4%.
In a statement, Commerce Secretary Malcolm Baldrige said: “This pickup indicated that spending has resumed. . . . Continued growth in incomes indicates another good year ahead for retail business.”
Paul Lally, an analyst at the department’s Bureau of Economic Analysis, explained that the reported decline in auto sales was based on an estimate of total dollar sales by a relatively small survey of auto dealers.
“We can expect they will be revised upward in a bigger sample, considering that the unit sales figures were very strong,” Lally said. “Every indication we have is that the auto industry is doing very well.”
Autos aside, most of the key retail categories showed moderate gains for December. Furnishings--which includes consumer electronics--were up 2.8% for the month and 14.9% over the whole year, while apparel was up 1% for the month and 11% for the year. Gasoline sales were down 1.4% for December, but this was attributed mainly to recent declines in oil prices.
“All the bread-and-butter categories showed a solid increase, except for autos, and the auto number was suspect,” said Allen Sinai, chief economist for Shearson Lehman/American Express. “The industrial production increase was a good sign. And if most sales were up also, that points to continuing increases in production during the first quarter of ’85.”
Sinai said he now believes that the Commerce Department’s “flash” estimate last month of 2.8% economic growth during the last quarter of 1984 “looks OK.” And he projects growth in the 3% to 4% range during the first three months of this year, he said.
