Data Show Economy Gaining Strength

U.S. manufacturing and home construction jumped in November and a measure of consumer prices fell for the first time in almost 21 years, evidence the world’s largest economy is strengthening without igniting inflation.

Industrial production rose 0.9% in November, the biggest jump in four years, the Federal Reserve said Tuesday. Housing starts rose to an annual rate of 2.07 million units, the fastest in almost two decades, the Commerce Department said. The Labor Department’s core index of consumer prices, which excludes food and energy, fell 0.1%, the first drop since December 1982.

“We have the best of both worlds here -- very strong growth and no inflation,” said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York. “Manufacturing has been the hardest-hit part of the economy, and it’s coming back.”

The core consumer price index rose 1.1% from a year earlier, the smallest gain since January 1966, suggesting that central bankers may be inclined to keep the benchmark interest rate at 1% through much of 2004, economists said.

Competition from overseas producers is deterring some U.S. companies from raising prices. Americans imported $121.3 billion more in goods and services from China and other countries in the third quarter than they exported, the Commerce Department said Tuesday.

The U.S. ran a deficit of $135 billion in its current account, the third-largest on record, the report showed. The gap, the broadest measure of international trade because it includes investments, narrowed from a record $139.4 billion in the previous three months.

The rise in November industrial production reflected increased output of computers, appliances and business equipment. The increase in production at factories, mines and utilities last month was the largest since October 1999 and follows a revised 0.4% gain in October. The proportion of industrial capacity in use rose to 75.7% from October’s 75.1%.

Consumer inflation was restrained in November by cheaper airfares, clothing and lodging, the Labor Department’s report showed. The total consumer price index fell 0.2% in November, pulled down by a 3% drop in energy costs.

The Commerce Department reported that housing starts rose 4.5% from October’s 1.98-million pace. Starts were the highest since February 1984 and builders began work on more single-family homes than ever before.

Beginning construction of single-family homes increased 3.3% to a 1.695-million annual rate. Starts for apartment buildings and other multifamily homes rose 10.6% to a 375,000 rate.

By region, starts rose 15.7% in the Northeast to a 177,000 rate; 10.4% in the West to 582,000, the most since December 1978; and 8% in the Midwest to 420,000. Starts fell 2.2% in the South to 891,000.