Factory boost for America’s slow recovery

Julian Harris
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BROAD based rises in consumer prices and manufacturing were warmly received in the US yesterday, following the Federal Reserve’s final meeting of the year on Tuesday.

Positive industrial production figures offer hope for the American economy as it stutters towards recovery.

Overall production rose 0.4 per cent in November, despite a huge drop in automobile output.

“Motor vehicle output can be volatile from month to month,” said Paul Ashworth of Capital Economics. “Otherwise, the gains in manufacturing output were fairly broad based.”

Excluding motor vehicles, manufacturing output increased by 0.7 per cent on October.

And an index of business morale in the sector bounced back after a fall in November. The Empire State manufacturing survey jumped 22 points to record a positive reading of 10.6.

“This is more evidence suggesting that the economy is getting its groove back,” commented Ashworth.

Meanwhile, core US consumer prices (excluding food and energy) grew steadily by 0.1 per cent in November, in line with expectations.

Headline inflation measured 1.1 per cent on last year, slightly down from October’s rate of 1.2 per cent.

“The period of disinflation has largely run its course,” said Peter Newland of Barclays Capital Research. The data showed “small rises across most core components,” he said.

Fed chairman Ben Bernanke recently told television programme 60 Minutes that the US was “close to a point where prices start falling.” Deflation would be “a serious concern” if the Fed did not pursue historically loose monetary policy, he said.

And the US housing market remains stagnant, according to the National Association of Home Builders. Yesterday the group reported unchanged sales rates for December.