Industrial Production in U.S. Probably Increased in January

Industrial production in the U.S. probably rose in January for a third consecutive month, adding to signs manufacturing is leading the expansion, economists said before a report today.

Output at factories, mines and utilities increased 0.5 percent after a 0.8 percent gain in December, according to the median forecast of 80 economists surveyed by Bloomberg News. Other figures may show homebuilding climbed from a one-year low, and rising costs for oil and raw materials pushed up wholesale prices.

Overseas demand for American-made goods coupled with gains in business and consumer spending mean manufacturing, which accounts for about 11 percent of the economy, will keep bolstering growth. Housing, the industry that helped trigger the recession, is struggling to recover from depressed levels as unemployment hovers around 9 percent and lenders foreclose on delinquent owners.

“Manufacturing is benefiting from export orders and growth in U.S. demand,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “That’s really driving growth. The residential construction market is an absolute laggard in this economy.”

The Federal Reserve’s data on industrial production is due at 9:15 a.m. in Washington. Economists’ estimates ranged from an increase of 0.9 percent to a drop of 0.5 percent.

Home Building

At 8:30 a.m., the Commerce Department may report builders broke ground on 539,000 homes at an annual rate in January, according to the median forecast in the Bloomberg survey. Permits, an indicator of future construction, likely slumped after builders rushed to fill applications in December before changes in building codes took effect this year.

Producer prices rose 0.8 percent last month, economists in the survey projected. The Labor Department release is also due at 8:30 a.m. Core wholesale costs, which exclude food and fuel, probably climbed 0.2 percent for a second month.

While demand in emerging markets is boosting commodity costs, companies have limited scope to pass those increases on to consumers. The lack of inflation and absence of a pickup in employment are among reasons the Fed may complete $600 billion in asset purchases by June to stimulate the economy.

Inflation may “persist below the levels that Fed policy makers have judged to be consistent” with their long term goal, Fed Chairman Ben S. Bernanke told the House Budget Committee on Feb. 9. He also said “output growth likely to be moderate for a while.”

Fed Minutes

Minutes of the Fed’s January meeting, due at 2 p.m., may shed more light on policy makers’ discussions on growth, inflation and the labor market. The central bank also will issue updated forecasts.

Today’s data may show the influence of last month’s weather on factory production and housing starts. Winter storms spread from the Midwest and the South to New England, covering 71 percent of the country with snow on Jan. 12, according to the National Climatic Data Center.

“Chances are, activity was held down by the weather,” said Jim O’Sullivan, global chief economist at MF Global Inc. in New York.

Factories, which led the economy out of the recession that ended June 2009, are likely to stay busy this year as consumers continue spending, businesses invest in new equipment and companies replenish inventories to meet sales in the U.S. and abroad.

Orders Rising

Parker Hannifin Corp., a Cleveland-based manufacturer viewed as a barometer of global industry, is among businesses seeing an improvement in orders as the economy recovers. The maker of components used in construction equipment, aircraft, refrigeration, and hybrid delivery trucks also projected growth in the Europe, Asia and Latin America regions.

“We’re pretty bullish as far as what the future order pattern is,” Thomas Williams, executive vice president and operating officer, said on a conference call on Feb. 9. “Our backlog is building,” he said, and “we’ve got ramp-up in volume.”

Investors are bullish on the outlook for manufacturers. The Standard & Poor’s Supercomposite Machinery Index has surged 56 percent in the 12 months to Feb. 15, outpacing a 21 percent gain in the broader S&P 500 index.

Recent reports reinforce projections for continued growth in manufacturing. The Institute for Supply Management’s factory index jumped last month to the highest level since May 2004, while the Fed Bank of New York’s general economic gauge showed activity expanded in February at the fastest pace since June. （source from：Bloomerg）