Factory data give hopeful signs for US
WASHINGTON: The US economy ended 2012 on a surprisingly sound note as factory output climbed and low inflation lifted consumers’ purchasing power, signs the economy may be able to weather the higher tax bills that rang in the new year.
Manufacturing output climbed 0.8% in December, the Federal Reserve said, a day after retail sales data pointed to robust consumer spending last month.
“There is every indication that the improvement may be a reflection of a broader pick-up in overall economic-activity,” said Millan Mulraine, an economist at TD Securities in New York.
The rise in demand appears unlikely to derail the Federal Reserve’s easy monetary policy anytime soon given the lack of inflation. The Labour Department said consumer prices were flat in December, restrained by a decline in gasoline prices.
That’s good news for consumers still smarting from the 2007/09 recession. Weekly earnings rose 0.6% last month when adjusted for inflation, the Labour Department said.
The earnings data means family budgets started this month on slightly better footing as a rise in payroll taxes hit workers and the wealthiest Americans faced higher income taxes.
The tax hikes, aimed at reducing the lofty federal budget deficit, are expected to hold consumer spending back in the first half of 2013. Some economists think higher taxes will subtract a full percentage point from economic growth this year.
US financial markets were little moved by the data, even though the increase in factory output and real earnings beat the forecasts of analysts polled by Reuters. — Reuters