Manufacturing got off to a weak start this year in the United States as motor vehicle output tumbled in January, but a rebound in factory activity in New York State suggested that any setback would be temporary.
The New York Times
In a further sign that the sluggish economic recovery remains on track, consumers were a bit more upbeat early this month even as they paid more for gasoline and a tax increase reduced their paychecks, other data on Friday showed.
“The economy is on a slowly improving course and it’s got enough headwinds that we are going to see some volatility in these month-by-month numbers,” said Jerry Webman, chief economist at Oppenheimer Funds in New York.
Manufacturing output fell 0.4 percent last month, the Federal Reserve said. But production in November and December was much stronger than previously reported, and the 3.2 percent drop in auto output in January — the largest since August — followed two solid months, suggesting it was just a temporary pause.
“Given that most of the weakness was due to the giveback in motor vehicle production after the 11 percent surge in activity during the last two months of last year, we expect this retreat in industrial output to be temporary,” said Millan Mulraine, senior economist at TD Securities in New York.
In a separate report, the New York Federal Reserve Bank said its Empire State general business conditions index, which gauges factory activity in the state, rose to 10.0 from minus 7.8 the month before. The index for February showed the first growth in the sector since July and the best performance since May 2012.
The rebound was driven by new orders, which hit their highest level since May 2011. Economists said the rising activity most likely reflected recovery from Hurricane Sandy, which struck the East Coast in late October.
“What we are seeing in manufacturing is that growth that had been leading the economy is now roughly keeping pace with the overall economy, and that’s likely to remain the case through 2013,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.
Separately, the Thomson Reuters/University of Michigan index of consumer sentiment rose to 76.3 in early February, from 73.8 in January.
Households drew comfort from steady job gains, which together with rising home and stock prices should help offset a recent increase in payroll taxes and underpin consumer spending.
“Consumers are getting over the fact that their paychecks are a little smaller since the beginning of the year due to the sunset of the payroll tax holiday,” said Thomas Simons, an economist at Jefferies & Company in New York.
“This offers some encouragement that consumption will recover following a weak month in January.”
The weakness in manufacturing last month contributed to push overall industrial production down 0.1 percent. Production at the nation’s mines fell 1 percent, but cold weather lifted utilities’ production by 3.5 percent.