Soaring Factory Output Boosted Economy in December

factory outputBy DANIEL WAGNER, AP Business Writer


WASHINGTON -- U.S. factory output surged in December by the most in year. Stronger demand for business equipment, vehicles and energy offered the most visible evidence that manufacturing has roared back from the depths of the recession.

The Federal Reserve said Wednesday that manufacturing increased 0.9% in December, the biggest gain since December 2010. And the overall output of the nation's factories, mines and utilities grew 0.4% in December. Warm weather dampened demand for energy produced by utilities.

Industrial output is less than 5% below its pre-recession peak, reached in September 2007. It has increased more than 14% since hitting a recession low in June 2009.

Manufacturing activity remains nearly 8% below its pre-recession peak in July 2007. Yet it has increased almost 15% from its recession low. The recession hit manufacturing harder than the overall industry, so its path to recovery has been a little slower.

Factories benefited in the second half of 2011 from a number of trends. Consumers bought more cars. Businesses boosted spending on industrial machinery and computers. And companies are restocking their warehouses again after cutting inventories over the summer.

Still, Europe's debt crisis has already started to dampen demand for American exports. That could slow manufacturing and threaten growth in the 2012.

In December, factories made more goods that are used early in the production process -- construction materials, metals and wood products. That typically signals that production of finished products will increase in the coming months.

Other reports showed manufacturing is picking. New orders rose and production increased last month, according to a private survey by the Institute for Supply Management. The government said factories hired a net 23,000 workers -- the best job growth for the sector since July.

The New York and Philadelphia regions also saw a rise in demand for goods at the end of the year, according to surveys by the Federal Reserve banks in those areas. And the Federal Reserve Bank of New York said Tuesday that January's growth in the region was the best in nine months.

In November, industrial production declined for the first time in seven months. And factory production, the biggest single element of industrial production, fell. Manufacturers produced fewer cars, home appliances, electronics and business equipment.

Economists blamed temporary factors for the decline, such as severe flooding in a region of Thailand that produces hard drives for many of the world's computers.

Prior to November, factory output was strengthening after a spring slump brought on in part by the Japan earthquake and tsunami. That disrupted supply chains, which slowed U.S. auto production.

Car and truck manufacturers are busy again. U.S. automakers said November and December were the best sales months in 2011. GM's December sales rose 5%, Ford's climbed 10% and Chrysler's surged a whopping 37%.

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Mike

FEDERALISM HAS BEEN DESTROYED BY LIBTARDS. Let it default and fade away we have 50 state govts to do the job and leave all the fed parasites unemployed. Win win! Got gold?

January 24 2012 at 10:27 AM Report abuse rate up rate down Reply
ccccdccc

I hope the statistics do represent a turnaround... I fear that since the bonus depreciation rules went away 12/31/11 that the capital expenditures were made to beat the deadline and that early 2012 will return to the dregs...

January 19 2012 at 7:10 PM Report abuse rate up rate down Reply
Mike

Increased out put? Man its steroid libtard autor day! Now its clear AOL has got tob on Ocommy's pay roll! What a bold faced lie in the very clear face of the truth every American sees every day! Dam!

January 19 2012 at 11:59 AM Report abuse rate up rate down Reply
kngathr

ZERO tax on US Manufacturers, 17.5% on US Services, 15% VAT on all foreign(produced outside US) Manufacturing brought into US and services located outside our country back into the US-- companies would need to relocate Domestically and that fixes unemployment. I am not a protectionist, but I see little option.

More Ideas at FixTheNation.com

January 19 2012 at 8:26 AM Report abuse rate up rate down Reply
maloontransllc

They are getting all excited about the growth ? lets not forget that there are still Millions of Americans out of work. We are not out of Danger yet the price of Energy still can crush the recovery if the thiefs on wall st are not kept under contol. The speculators still have the world by the throat with there run up in oil prices.

January 18 2012 at 10:26 AM Report abuse rate up rate down Reply
2 replies to maloontransllc's comment
bggdg

First, keep in mind that for every speculative buyer of a futures, there must also be a seller of that contract (and vice versa). And furthermore, that every buyer of a futures contract can only profit from that transaction if they temselves become a future seller of the contract. As a result, buyers and sellers of futures contracts are exactly equal.

Also keep in mind that speculators make money just as easily with decling prices as they do with rising prices. After all, if not, it wouldn't be "speculating".

In short, futures speculators have essentially no impact on prices (although they do positively impact liquidity and price discovery).

January 18 2012 at 11:10 AM Report abuse rate up rate down Reply
bggdg

Also, what many seem to be unable of grasping is the dichotomy between industrail PRODUCTION and industrial EMPLOYMENT.

There IS reason to get excited about strong growth in PRODUCTION. After all, it IS a sign of economic vitality. And if industrial production were declining, how much WORSE do you think things might be?

But the industrial revolution is over, and we now live in the kinowledge worker revolution. What this means is that we can now PRODUCE MORE with LESS labor. And 10 years from now we''ll be able to produce even more with even less labor than today. In other words, "old" jobs are not coming back.

Furhter, this is simply history repeating itself. Before the industrial revolution, ours was an agrarian economy. Fully 60% of citizens worked in agriculture back in the 1800's. As the industrial revolution took hold, our ability to produce more agricultural products while using less labor exploded. Today, less than 3% of our population works in agriculture, even though our agricultural production has skyrocketed, and we feed much of the rest of the world.

But this didn't mean a loss of jobs. Instead, dedicating less resources toward food production meant more resources were available to dedicate toward other endeavors. And industrial employment exploded.

What is happening today in industrial employment is what happened a century ago in agricultural employment. And what happened in industrial employment over the ensuing decade is what will happen in the future in knowledge worker employment.

January 18 2012 at 11:20 AM Report abuse rate up rate down Reply
1 reply to bggdg's comment
bggdg

Except there was no "disastrous unemployment caused by the use of mechanical production methods".

As always, some workers are poorly equipped to particpate in a dynamic economy. But the fact is that the indsutrial revolution created more jobs than it destroyed.

So will the knowledge worker revolution, assuming we don't allow populist fools to force us to cling to yesterdays economy..

January 18 2012 at 4:00 PM Report abuse rate up rate down
joey

ITS CALLED THE HOLIDAYS *******

January 18 2012 at 10:21 AM Report abuse rate up rate down Reply