Like Stock Market, U.S. Economy Still Seeks Direction

By John S. McClenahen U.S. industrial production, which includes mining and utilities in addition to manufacturing, rose 0.1% last month, better than the 0.6% decline posted in October, reports the U.S. Federal Reserve. Nevertheless, November's increase is a bit of a disappointment to economists generally; they were looking for a 0.2% increase. Manufacturing alone increased 0.1% in November, matching the rate of increase in industrial production, but still disappointing many executives looking for sustainable upturn. "The small 0.1% increase in total and manufacturing industrial production was not much help to most manufacturers," says Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI, an Arlington, Va.-based business policy group. "Industry needs a re-accelerating general economy and more export opportunities to employ idle capacity and thus stimulate a rebound in capital spending," Meckstroth states. U.S. industry was operating at 75.6% of capacity last month, a tenth of a percentage point better than in October, but significantly below the 1972-2001 average of 81.5%. Factories operated at 73.8% of capacity in November, the same as in October. "The lack of business investment in equipment is the brake holding back a manufacturing recovery," says David Huether, chief economist at the National Association of Manufacturers, Washington, D.C. "It is imperative that Congress and the Administration develop and implement [an economic] stimulus package that not only sustains the consumer sector but more importantly encourages business investment, which is the key to faster growth in 2003." Meanwhile, the U.S. housing market continues to show considerable strength. Starts for privately owned housing were at a seasonally adjusted annual rate of 1.697 million in November, 2.4% higher than in October, says the U.S. Commerce Department. Starts for single-family housing were at an annual rate of 1.39 million last month, 0.9% higher than in October. However, the start rates for both privately owned housing overall and single-family dwellings were well below September's spectacular rates of 1.808 million and 1.452 million, respectively. On another economic front, inflation remains well-contained. The Consumer Price Index (CPI) rose just 0.1% in November, following a 0.3% increase in October, says the U.S. Labor Department's Bureau of Labor Statistics. For the 12 months ending in November, the CPI increased only 2.2%. The "core" CPI, a measure of inflation that does not include the often-volatile month-to-month changes in food and energy, increased 0.2% in November, the same rate as in October. For the 12 months ending in November, the "core" CPI advanced just 2%.

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