Rising factory output gives economy a boost

Photo

Photo by: AP FILE PHOTO, DEC. 14, 2011

Assembly-line workers install dashboard air vents on a 2012 Ford Focus at the Ford Michigan Assembly plant in Wayne, Mich. U.S. factories roared to life in December, creating sharply more goods to meet strong demand for business equipment, materials, vehicles and energy.

Associated Press

WASHINGTON

U.S. factories are roaring back from the depths of the recession, cranking out more machinery, vehicles and energy.

Factory production has surged 15 percent above its lows of 21/2 years ago and is helping drive the economy’s recovery.

A jump in manufacturing output last month coincided with other data suggesting that the economy began 2012 with renewed vigor. Wholesale prices are tame. Demand for U.S. Treasury debt should help keep borrowing costs low. Even home builders are more optimistic.

Manufacturing rose 0.9 percent from November to December, the Federal Reserve said Wednesday. It was the biggest gain since December 2010.

Overall output at the nation’s factories, mines and utilities grew 0.4 percent. Warm weather dampened demand for energy produced by utilities.

Over the past year, factory output has risen 3.7 percent. Factories benefited in particular in the second half of 2011 from several trends: People bought more cars. Businesses spent more on industrial machinery and computers before a tax incentive expired. And companies restocked their supplies after cutting them last summer.

Many economists say manufacturing output should expand further this year, though some expect the pace to slow mainly because of Europe’s debt crisis.

Dan Meckstroth, chief economist at MAPI, a manufacturing research group, said there’s still plenty of pent-up consumer demand for cars. That demand should keep production of cars and auto parts growing.

And high prices for oil, copper and other metals should boost growth in mining and drilling. That would lead to greater demand for drill pipes, large trucks used in mining and other gear, in the United States and overseas.

Another contributor to growth could be construction, which is showing signs of life as builders put up more apartments, office buildings and factories. That means construction firms need more manufactured goods, such as drywall, steel beams, glass and copper wires.

Last year’s growth has also fueled more hiring. Factories added 23,000 jobs in December, the most since July.