Industrial Production and Energy Prices Turn up in November

By December 15, 2009Economy

The Federal Reserve’s report today that manufacturing production increased by a strong 1.1 percent in November is a welcomed turnaround and signals that positive momentum is building in the industrial sector. With 15 of the 19 major manufacturing industries expanding last month, the November rise in factory output was the most widespread gain in three months. Still, the fact that upturns in manufacturing production have failed to reach a majority of manufacturing industries in three of the past six months shows that a broad-based economic recovery has yet to materialize for American industry. At this point, the emerging recovery is best described as fragile.

On a separate note, the Labor Department reported that finished producer prices rose by 1.8 percent in November, mainly due to a 6.9 percent rise in the price of energy goods. Outside of energy, prices rose a more modest 0.5 percent, the first increase in three months. An emerging global economic recovery is starting to put upward pressure on energy prices. Since the major economies of the world began to recover earlier this year in March, domestic energy prices at the producer level have increased at an annual rate of 34 percent. With a slack labor market suppressing wages, rising energy prices could again emerge as a significant problem for the U.S. economy just as a recovery is trying to take hold.

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