The U.S. economy continues to expand, with last week’s manufacturing and housing indicators showing progress. While the top-line industrial production figure was unchanged, manufacturing production rose a healthy 0.7 percent in January, led by strong growth in the durable goods sectors. Manufacturers are producing 4.7 percent more than one year ago, and capacity utilization rates also are up significantly. Similar findings were observed in the New York and Philadelphia Federal Reserve Bank regions, which showed expanding activity and mostly positive trends moving forward.
News from the housing market was also more upbeat. Housing starts rose to nearly 699,000 new units in January, and with some revisions, new residential construction topped 700,000 in November – the highest level since October 2008. These figures remain well below the levels of a few years ago, yet it is nice to see the trend line moving higher. Data from the National Association of Home Builders echo these findings, with its Housing Market Index up from 14 in September to 29 in January. Still, significant financial obstacles continue to challenge many would-be homebuyers and hold back growth.
Despite continued anxieties, the American consumer has begun spending again, with retail sales up 0.4 percent in January. This trend can also be seen in the pricing data. Higher traffic in restaurants and hotels, for instance, has helped to increase these costs. Both consumer and producer prices rose in January and were lifted by larger food and energy expenses. Yet, a mild winter has helped to mitigate the run-up in gasoline prices, with home energy costs lower. Inflationary pressures remain modest, despite the fact that core inflation remains above 2 percent.
This week, only a handful of economic reports will be released. In addition to some housing data, we will learn about manufacturing activity in the Kansas City Federal Reserve Bank region, and the Chicago Fed will likely highlight continued progress in the economy with its National Activity Index.
Chad Moutray is chief economist, National Association of Manufacturers.