WASHINGTON (AP) — Factory production in the United States has surged 15 percent above its lows of two and a half 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, and another report shows that wholesale prices are tame.
There appear to be signs “that manufacturing in the U.S. is gaining global market share,” said John Ryding of RDQ Economics, “and this could be an important dynamic supporting growth in 2012.”
Manufacturing rose 0.9 percent from November to December, the Federal Reserve said Wednesday. It was the biggest monthly gain since December 2010.
Overall output at the nation’s factories, mines and utilities increased 0.4 percent. Warm weather reduced demand for energy produced by utilities.
Over the last 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.
The growth has also fueled more hiring. Factories added 23,000 jobs in December, the most since July. That helped reduce the unemployment rate to 8.5 percent, the lowest level in nearly three years.
Still, Europe’s debt crisis has begun to dampen demand for American exports. That trend, should it continue, could slow manufacturing and threaten growth this year.
December’s gains suggest the industry “is still resistant to the apparent slowdown in growth elsewhere, particularly in Europe,” said Paul Ashworth, chief United States economist with Capital Economics.
Businesses are starting to see some relief from high prices for energy and food, and that should benefit consumers later this year.
The Producer Price Index declined 0.1 percent in December, the Labor Department said Wednesday. The index measures price changes before they reach consumers.
Core wholesale prices, which exclude costs for food and energy, rose more sharply in December — 0.3 percent. But economists played down the increase. They cited temporary factors that had pushed auto prices down in October and November.
Over all, wholesale prices are trending lower. They increased 4.8 percent in December compared with the same month a year ago, reflecting in part the effect of higher oil and other commodity prices. Even so, it is the slowest annual increase since January and down from 7.1 percent in July.
Falling prices for oil and agricultural commodities have lowered the cost of food and gas.
Gas prices have turned upward in recent months, but economists do not expect that to worsen inflation this year because prices will most likely be lower than last winter and spring, when political turmoil in North Africa and the Middle East sent prices up.
Lower wholesale costs mean manufacturers and retailers face less pressure to raise prices for consumers to maintain profits. That could keep consumer price inflation in check.
Lower inflation also gives the Federal Reserve leeway to keep short-term interest rates low and take other steps, if necessary, to bolster the economy.
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