Here is the summary from this week’s Monday Economic Report:

Some of the indicators released last week helped confirm the belief that the U.S. economy has started 2013 on a stronger-than-expected note. First, industrial production rose 0.8 percent in February, led by strong demand for automobiles and other goods. This was a decent turnaround from much weaker numbers in January, with all but three major manufacturing sectors experiencing higher production. Second, retail sales rose a surprisingly healthy 1.1 percent in February. While much of that growth stemmed from higher gasoline prices and higher motor vehicle sales, the data suggested modest growth overall, with Americans continuing to make modest gains in purchases despite headwinds from higher taxes and fiscal uncertainties.

At the same time, those headwinds appear to be having some negative impacts. Industrial production was increasing at a 5.1 percent year-over-year pace at this point last year; today, that rate is 2 percent. That example can be replicated in so many of the recent indicators. For instance, the NAM/IndustryWeek Survey of Manufacturers reported an uptick in optimism in the latest survey, with sales expected to grow 2.3 percent over the next year. That represents an improvement from three months ago (when the rate was 1.0 percent), and the percentage of respondents who were positive about their own company’s outlook rose from about 52 percent in December to roughly 70 percent today. But this is a come-down from the stronger pace of nearly 5 percent growth in annual sales expected in March of last year (when approximately 89 percent were positive in their outlook). Clearly, more work still needs to be done to get the economy moving. (continue reading…)

The New York Federal Reserve Bank’s Empire State Manufacturing Survey observed a rebound in activity in February, ending six straight months of contraction. The composite index of general business conditions rose from -7.8 in January to 10.0 in February. The percentage of those citing reduced conditions declined from 33.7 percent to 18.7 percent, with the bulk of those responses shifting to a more neutral viewpoint. This suggests that while attitudes were definitely more positive this month, there remains some degree of caution about the larger macroeconomic picture.

Nonetheless, the larger story is the increase in manufacturing activity in February, and the principle driver of these higher figures was higher sales. The index for new orders increased from -7.2 to 13.3, a significant shift. Indeed, the percentage of businesses with higher sales this month increased from 27.9 percent in January to 35.9 percent in February. Similar responses were seen for shipments and employment. Even with the faster pace of hiring, though, it should be noted that almost 72 percent of manufacturers did not change their employment levels. As we have seen in other indicators, hiring continues to lag other measures even as other measures have started to improve.

This more-positive assessment flows into the forward-looking data, as well. The index of general business conditions based on the respondents’ future expectations rose from 22.4 to 33.1, with roughly half of those surveyed anticipating better conditions six months from now. Measures for new orders, shipments, employment, and capital spending were all higher. Inventories are not expected to change, and pricing pressures should remain elevated.

Chad Moutray is chief economist, National Association of Manufacturers.