Production Drops to 6-Year Low
Global economic turmoil put a damper on U.S. industrial production in January but showed few signs of hurting domestic demand as housing starts roared ahead at full steam at the start of the year.
Industrial production was flat despite a slight increase in factory output, the Federal Reserve said in a report released Wednesday. U.S. mines, factories and utilities operated at 80.5% of capacity.
That’s the lowest level in more than six years and means industry has the capacity to increase output, if necessary, without incurring inflation-causing production bottlenecks.
Construction starts of new homes soared in January to their highest level in more than a decade, Commerce Department data showed.
Boosted by rising consumer incomes and low interest rates, total starts jumped 3.8% to a seasonally adjusted annual rate of 1.804 million, far above analyst expectations of 1.68 million. January’s building rate was the highest rate in more than 13 years.
“The manufacturing sector continues to be the weakest area in the economy but it continues to do fairly well considering everything working against it--namely the strong dollar and weak exports,” said Jeff Palma, an economist at Bankers Trust. “However, the U.S. economy remains quite strong as evidenced by today’s housing starts report.”
Utilities boosted output by 0.2% in January. Manufacturing companies raised output by 0.1%, as gains in the output of autos, computers, semiconductors, lumber and furniture offset declines for aircraft, steel, clothing and tobacco.
On the domestic front, the gain in January housing starts was concentrated in apartments, where starts shot ahead at a 13.9% rate to 410,000 units. Starts on single-family homes rose 1.2% to 1.394 million in January, their highest level since February 1984.
Housing starts were strongest in the South, where they rose 22.3%, while the West saw a 3.7% gain. But starts dropped 25.3% in the Midwest and fell 3.2% in the Northeast.
A separate report Wednesday showed that prices U.S. businesses paid for imported goods rose in January as the cost of foreign petroleum increased.
The import price index, a gauge of the cost of imported goods and raw materials, rose 0.2% last month, the Labor Department said, after a revised 0.8% decrease in December. Excluding petroleum, import prices rose 0.1% last month. Petroleum import prices rose 1.7%, after falling a revised 12.7% in December.
Prices of U.S. products exported to other countries were unchanged, after falling 0.1% in December.
For all of last year, import prices fell 6.2%, the largest decline since the index began in 1983, a Labor Department official said. Import prices fell 5.2% in 1997.
Prices paid for imported autos and parts increased 0.1% in January, while prices of imported consumer goods excluding automotive goods rose 0.2%.
Sluggish economic growth abroad has depressed demand and led to lower prices for a variety of industrial goods and commodities, ranging from oil to copper and computer chips.
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Housing Starts
Seasonally adjusted annual rate, millions of units:
January: 1.8 million
Source: Commerce Department
