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US factory output ticks up for 5th straight month in December Homebuilding dips

WASHINGTON, Jan 17, (AP): US factory output rose for a fifth straight month in December, as manufacturers cranked out more cars and trucks, appliances and processed food. The gains suggest factories gave economic growth a strong boost at the end of the year. The Federal Reserve said Friday that factory production rose 0.4 percent in December. That follows gains of 0.6 percent in both November and October. Automakers increased their production 1.8 percent last month and 10.4 percent year over year. Higher consumer demand is driving much of the increased manufacturing activity. Production of appliances, furniture, carpeting, food and clothing all grew in December. Output of consumer goods gained 0.5 percent.

Production
Overall industrial production, which includes manufacturing, mining and utilities, increased 0.3 percent in December. That’s also the fifth straight monthly gain. Total production increased 3.7 percent over the last 12 months and has surpassed its pre-recession peak. Output is now 22 percent above its recession low hit in June 2009, the month the downturn ended. Other indicators point to continued manufacturing strength. Factory orders climbed 1.8 percent in November. A surge in aircraft demand led the increase in orders, while businesses stepped up spending on machinery, computers and other long-lasting goods. And despite a slowdown in hiring last month across the broader economy, factories added jobs for the fifth straight month in December. Rising factory orders should help keep economic growth solid in the October-December quarter. Several economists project growth at a 3 percent annual rate in that period after a 4.1 percent rate in the previous quarter. There are signs that the rate of growth for factory production could slow.

Automakers drove much of the improvement in industrial production through the end of last year, as motor vehicle sales jumped 8 percent to 15.6 million last year. However, many industry analysts expect the pace of buying to decline in 2014. Cars and trucks are lasting longer and families are unlikely to splurge on extra vehicles until the economy kicks into higher gear. That could signal slower growth in factory output in the coming months. Overall economic growth remains modest by historical standards. And though factory orders have strengthened in recent months, the rate of growth has slowed during the recovery from the 2008 financial crisis.

Meanwhile, US home construction slowed in December but ended 2013 with the best showing since the housing bubble burst. The Commerce Department said Friday that builders broke ground last month at a seasonally annual rate of 999,000. That’s 9.8 percent lower than November’s pace of 1.12 million, which was the fastest in five years. For the year, builders started 923,000 homes and apartments, up 18.3 percent from 2012. It was the fourth straight annual gain and the strongest since 2007, when 1.36 million homes were started. The housing market has been recovering steadily over the past year, helping to boost economic growth and create jobs. But a rise in mortgage rates from record lows reached a year ago have started to weigh on those gains.

Still, economists said they December’s dip in activity followed a huge gain November. They also blamed some of the decline last month on cold weather, which may have disrupted some construction activity.
“Despite really bad weather, builders still managed to keep digging and that is a great indication that the housing market continues to move forward,” said Joel Naroff, chief economist at Naroff Economic Advisors. For December, construction of single-family homes, which makes up roughly two-thirds of homebuilding, fell 7 percent to an annual rate of 667,000. Construction of apartments, which can be more volatile, dropped 14.9 percent to a 332,000 rate. Applications for building permits, considered a good sign of future activity, fell 3 percent in December to a rate of 986,000. Single-family permits fell 4.8 percent. Permits for apartments were unchanged.

Construction activity in December fell 33.5 percent in the Midwest and 12.3 percent in the South. Construction rose 15 percent in the West and was unchanged in the Northeast. Mortgage rates are roughly a percentage point higher than in the spring. Still, they remain low by historical standards. The average rate on a 30-year mortgage fell to 4.41 percent this week. That’s down from a peak of 4.6 percent in August. US homebuilders remain generally upbeat ahead of the spring home-buying season. The National Association of Home Builders/Wells Fargo builder sentiment index slipped to 56 in January, down slightly from a 57 reading in December. Readings above 50 indicate more builders view sales conditions as good rather than poor. Even with the small dip, the overall index remains in positive territory and is nine points higher than it was a year ago. Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.

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