US industrial production jumps 1.6%
Retail sales fell in December for 3rd straight month
SILVER SPRING, Maryland, Jan 16, (AP): U.S. industrial production rose 1.6% in December, a third straight monthly gain, but remains below its pre-pandemic level.
The December gain in industrial output followed a 0.5% increase in November and a 1% increase in October, the Federal Reserve reported Friday. Even with those gains, industrial output is still about 3.3% below its level in February before the pandemic hit.
Manufacturing increased 0.9%, its eighth straight monthly gain, even as production of motor vehicles and parts declined 1.6%. That follows a string of gains for the auto sector, including last month’s strong 5% increase. Without the drag in the auto sector last month, manufacturing posted gains of 1.1%.
Mining production rose 1.6%, while utilities’ output rose 6.2% as a rebound in December demand followed a 4.2% decline in November due to unseasonably warm weather.
U.S. industry operated at 74.5% of capacity in December, still below the pre-pandemic rate of 76.9% in February.
While December’s topline numbers were better than economists had expected, there is concern that rising coronavirus infections and a rocky vaccination campaign could further hamstring an already uneven recovery for the U.S. economy.
On Thursday night, President-elect Joe Biden unveiled a $1.9 trillion coronavirus plan that would speed up vaccines and deal financial help to those struggling with the pandemic’s prolonged economic fallout.
Oren Klachkin, an economist with Oxford Economics, said a financial relief package would provide a muchneeded immediate boost for the economy, but added that in the long-term, “vaccine roll outs will shift consumer spending more towards services, softening consumer goods demand and weighing on industrial activity.”
The Institute for Supply Management reported Tuesday that American factories grew in December at the fastest pace in more than two years. The
manufacturing sector has weathered the pandemic better than the battered services sector, but continues to face virus-related headwinds such as factory shutdowns needed to sanitize facilities and difficulties in hiring new workers as the virus surges again.
Meanwhile, Americans cut back on spending in December for the thirdstraight month as a surge in virus cases kept people away from stores during the critical holiday shopping season.
The U.S. Commerce Department said Friday that retail sales fell a seasonally adjusted 0.7% in December from the month before, a decline Wall Street analysts weren’t expecting. Sales also fell in October and November, even as retailers tried to get people shopping for Christmas gifts early by offering deals before Halloween.
Friday’s report covers only about a third of overall consumer spending. Services such as haircuts and hotel stays, which have been badly hurt by the pandemic, are not included.
The unexpected decline underscores the economy’s troubles as the pandemic has worsened this winter. Employers shed jobs last month for the first time since April. And layoffs appear to be continuing, as the number of people seeking jobless benefits jumped last week to the highest level since August.
That’s left many Americans with less to spend. But the recent $600 stimulus checks sent to most Americans is expected to boost the economy in the coming months. And as vaccines are more widely distributed, economists expect the economy to rebound at a healthy pace in the second half of this year.
So far, retailers have reported mixed results for the holiday season. Big box retailer Target, which sells groceries, fashions and cleaning supplies under one roof, said sales rose during the holidays as virus-wary people seek one-stop shopping. Meanwhile, chains typically found at malls, such as Nordstrom, Victoria’s Secret, and Urban Outfitters, reported a sales drop.
The Commerce Department said sales even fell online, down nearly 6% after rising 19% for the year.
That may be due to Amazon, which held its annual Prime Day sales event in October this year for the first time, which likely pushed people to shop earlier in the season and spend less in December, analysts at Wells Fargo Securities said. Walmart, Target and Best Buy followed Amazon’s lead, offering competing discounts to coincide with Prime Day.
At restaurants and bars, sales fell 4.5% in December as states restricted in-person dining, ending the year down 21%.
It wasn’t all bad news: Sales at home improvement stores continued to rise, up 0.9% last month after growing 17% for the year, as people spruced up their houses as they quarantined. But the biggest increase was at gas stations, likely due to a rise in gas prices and holiday-related road trips, which pushed sales up 6.6% after falling 12% for the year.