Production, Home Starts Probably Climbed: U.S. Economy Preview

Production, Home Starts Probably Climbed: U.S. Economy Preview


Dec. 13 (Bloomberg) -- Industries in the U.S. boosted production in November for a fifth consecutive month and housing starts rebounded, showing the world’s largest economy is picking up speed heading into 2010, economists said before reports this week.

A 0.5 percent gain in output last month, based on the median estimate of 62 economists surveyed by Bloomberg News ahead of a Federal Reserve report Dec. 15, would follow a 0.1 percent October advance. Builders may have broken ground on 579,000 houses at an annual pace, up 9.5 percent.

Fed Chairman Ben S. Bernanke last week said the economy faces “formidable headwinds,” signaling policy makers may reiterate a pledge to keep interest rates low following their last meeting of the year this week. Gains in consumer spending and lean inventories are prompting companies such as Ford Motor Co. to rev up assembly lines, giving the expansion a lift.

“Businesses are scrambling to slow the considerable pace of inventory decline against a backdrop of expanding sales, including rising exports and some pickup in domestic demand,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Part of manufacturing with ties to housing and the consumer will take the handoff from autos and drive manufacturing gains this quarter.”

The Fed’s industrial production figures may show the proportion of plant capacity in use probably rose to 71.1 percent from 70.7 percent, according to the survey median.

Auto Sales

Auto sales are climbing again after plunging in September, the month after the government’s “cash-for-clunkers” plan expired. General Motors Co., Toyota Motor Corp., Ford and Chrysler Group LLC all posted November sales that beat analysts estimates. The seasonally adjusted sales rate was 10.9 million vehicles, up from 10.45 million in October, according to industry figures released this month.

Ford, the only major U.S. automaker to avoid bankruptcy, plans to boost first-quarter North American production by 58 percent from a year earlier to 550,000 vehicles.

Deere & Co., the world’s largest maker of farm equipment, last week said early order combine sales in North America, those for equipment that won’t be used until the middle of next year, topped its estimates and November demand was better than anticipated.

“Bottom line -- business has strengthened a bit from what we were expecting,” Marie Ziegler, vice president of investor relations, said at a presentation Dec. 10.

Exports, Dollar

Manufacturers are benefiting from rising demand overseas as the global economy recovers from the worst slump since World War II. A 12 percent drop in the value of the dollar from a four-year high on March 3 against its major trading partners is making American goods more competitive. Exports have risen for six consecutive months since reaching a three-year low in April.

The Standard & Poor’s 500 Index is up 4.7 percent so far this quarter after rising 32 percent in the six months to September, the biggest two-quarter gain since 1975, on signs the economy was improving.

A report from the Commerce Department on Dec. 16 may show housing starts rebounded last month after dropping 11 percent in October. Concern over the looming expiration of a government tax credit and the wettest October in more than a century of record-keeping held back builders that month, economists said.

A federal tax credit for first-time homebuyers, due to expire on Nov. 30, was extended last month until April 30 and expanded to include current owners. The incentive had helped boost sales and construction, marking stabilization in the housing market from the worst slump since the 1930s.

Consumer Prices

The rebound in global growth and the drop in the dollar have also pushed fuel costs up. Consumer prices probably rose 0.4 percent in November on higher gasoline prices, according to the survey median before a Labor Department report Dec. 16. Core consumer prices, which exclude food and energy, rose 0.1 percent after a 0.2 percent October gain, the survey showed.

Bernanke, in comments Dec. 7 at the Economic Club of Washington, cited a weak labor market and tight credit as ongoing drags “likely to keep the pace of expansion moderate.” The Fed’s decision on interest rates is due Dec. 16, at the end of two days of meetings.



Bloomberg Survey

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= Release Period Prior Median
Indicator Date Value Forecast
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Empire Manu. Index 12/15 Dec. 23.5 24.0
PPI MOM% 12/15 Nov. 0.3% 0.8%
Core PPI MOM% 12/15 Nov. -0.6% 0.2%
PPI YOY% 12/15 Nov. -1.9% 1.8%
Core PPI YOY% 12/15 Nov. 0.7% 0.9%
Net Long Term TICS $ Bl 12/15 Oct. 40.7 42.3
Total TICS $ Blns 12/15 Oct. 133.5 62.5
Ind. Prod. MOM% 12/15 Nov. 0.1% 0.5%
Cap. Util. % 12/15 Nov. 70.7% 71.1%
NAHB Housing Index 12/15 Dec. 17 18
Current Account $ Blns 12/16 3Q -98.8 -108.0
CPI MOM% 12/16 Nov. 0.3% 0.4%
Core CPI MOM% 12/16 Nov. 0.2% 0.1%
CPI YOY% 12/16 Nov. -0.2% 1.8%
Core CPI YOY% 12/16 Nov. 1.7% 1.8%
Core CPI SA Index 12/16 Nov. 220.453 220.674
CPI NSA Index 12/16 Nov. 216.177 216.230
Housing Starts ,000’s 12/16 Nov. 529 579
Building Permits ,000’s 12/16 Nov. 551 570
Initial Claims ,000’s 12/17 12-Dec 474 465
Cont. Claims ,000’s 12/17 5-Dec 5157 5170
LEI MOM% 12/17 Nov. 0.3% 0.7%
Philly Fed Index 12/17 Dec. 16.7 16.0
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