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Posted on 01/14/2005 9:20:03 AM PST by alessandrofiaschi
WASHINGTON (Reuters) - U.S. industrial output grew strongly last month while producer prices fell at the sharpest rate in 1-1/2 years amid tumbling energy prices, according to reports suggesting healthy, noninflationary growth.
U.S. factories, mines and utilities boosted production by a more-than-expected 0.8 percent in December, leading to a 4.1 percent gain for all of 2004, the best annual showing in four years, a Federal Reserve report showed on Friday.
Separately, the Labor Department said producer prices dropped 0.7 percent last month, a sharper-than-expected decline and the biggest since April 2003. Prices were also well contained when excluding volatile food and energy costs, with the core producer price index advancing a mild 0.1 percent.
U.S. stock prices rose in the wake of the report, while prices for U.S. Treasury bonds slipped and the dollar moved higher on expectations the Federal Reserve would stick with a steady, mild course of interest-rate hikes.
The Fed has raised overnight rates by a quarter-percentage point at each of its last five policy meetings, pushing overnight borrowing costs up to 2.25 percent from a 1958 low of 1 percent. The central bank has said it should be able to stick to a "measured pace" of rate hikes and keep inflation at bay.
"It looks like the economy is still quite healthy and the Fed is probably following the appropriate course," said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis. "The economy doesn't need low interest rates."
PRODUCTION, PRICES
The Fed's report on output at the nation's factories, mines and utilities showed shrinking economic slack.
The production ramp-up, which handily outstripped Wall Street's expectations for a 0.4 percent rise, led producers to tap 79.2 percent of their productive capacity, the most since January 2001, shortly before the economy fell into recession. Analysts had expected a figure of just 78.9 percent.
The gain in production was broad-based. Manufacturing output rose 0.7 percent, with production of both long-lasting goods like autos and shorter-lived products moving up. Utilities raised production by 2.7 percent, while mining output climbed 0.4 percent.
Christopher Low, chief economist at FTN Financial in New York, said the report suggested U.S. business productivity was still registering healthy gains, since the number of hours workers put in on the job last month had barely budged.
While the expansion appears to be on solid ground, it has yet to generate a rise in prices for most consumer products.
While some Fed officials have expressed concern over the potential for inflation, the large drop in producer prices and mild core price reading soothed fears in financial markets that the central bank might accelerate its rate-hike pace.
Wall Street economists had forecast just a 0.1 percent decline in the producer price index, which measures prices received by farms, factories and refineries, and had expected the so-called core rate to rise 0.2 percent.
For the year as a whole, producer prices rose a steep 4.1 percent as oil prices jumped. It was the biggest calendar year gain since an oil price spike in 1990 sent producer prices up 5.7 percent. The department said core prices rose 2.2 percent last year, the largest yearly advance since 1998.
In December, energy prices fell 4.0 percent. Like the overall decline in producer prices, it was the biggest energy price drop since April 2003, the department said.
INVENTORIES BUILDING
A third report showed U.S. business inventories rose more than expected in November while sales growth eased.
The 1.0 percent inventory rise reported by the Commerce Department surpassed Wall Street expectations for a 0.6 percent increase and suggested inventory building helped contribute to economic growth in the fourth quarter of last year.
Sales by manufacturers, retailers and merchant wholesalers rose a more modest 0.4 percent in November and the inventory-to-sales ratio, which measures how long it would take to deplete stocks at the current sales rate, rose slightly to 1.31 months' worth from October's record low of 1.30 months.
(Additional reporting by Mark Felsenthal and Laura MacInnis, Editing by Chizu Nomiyama, Reuters Messaging: tim.ahmann.reuters.com@reuters.net; 202 898 8370))
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Ping.
Thanks for the ping!
The economy is being kept propped-up by the largest accumulation of debt in our nation's history.
Here's the actual scorecard for 4 years of Bushonomics: US drops out of world's 10 freest economies list, says WSJ
Pinging the good news.
The doomers and gloomers are having a bad hair year.
"An excellent result made by our principled Administration." Cult of personality like language as seen in the old Soviet days.
Hi, Willie. Nice to meet you again (do you remember?)! I know this and I agree. But we have to admit that the large Federal Debt has not penalized us with a high inflation. The question now is: How long will it last?
Let me know your opinion. Bye.
Please, could you explain exactly what do you mean?
Howdy! Yes, I remember.
But we have to admit that the large Federal Debt has not penalized us with a high inflation.
I'm not confident with that statement.
Incumbant politicians were brutally beaten over the head 20 years ago during the days of "stagflation" and the "misery index".
Since that time, the gnomes at the Bureau of Labor Statistics have introduced numerous and confusingly sophisticated and complex methodologies to the calculation of CPI. IMHO, they are guilty of over-massaging the data and selectively excluding inflation-sensitive items such that the "official" index will never be a political issue again.
The debt doesn't matter, it is an accounting entry. What does matter is the percentage of GDP suctioned off to an inefficient Federal and State government. Federal debt just gets monetized at some point.
Which would you rather have, a government that had a trillion dollar a year debt but only spent a trillion (zero taxes, just printed money), or one that taxed 5 trillion and spent 5 trillion (high taxes but no debt)? Think about it for just a minute.
Debt actually helps because it crowds out Federal spending!
Worst economy since the Depression! It's Bush's fault!
I'm sure this is all below somone's "expectations."
All we'll hear about in the MSM is the deficit, oil and ...blah, blah, blah...
Inflation appears to be at 20%/year right now. That it hasn't changed Fed rates tells us more about the politcal machine of interest rates than the rate of inflation.
Economic Data: Growth Without InflationExcerpt:WASHINGTON (Reuters) - U.S. industrial output grew strongly last month while producer prices fell at the sharpest rate in 1-1/2 years amid tumbling energy prices, according to reports suggesting healthy, noninflationary growth.
U.S. factories, mines and utilities boosted production by a more-than-expected 0.8 percent in December, leading to a 4.1 percent gain for all of 2004, the best annual showing in four years, a Federal Reserve report showed on Friday.
Separately, the Labor Department said producer prices dropped 0.7 percent last month, a sharper-than-expected decline and the biggest since April 2003. Prices were also well contained when excluding volatile food and energy costs, with the core producer price index advancing a mild 0.1 percent.
U.S. stock prices rose in the wake of the report, while prices for U.S. Treasury bonds slipped and the dollar moved higher on expectations the Federal Reserve would stick with a steady, mild course of interest-rate hikes.
The Fed has raised overnight rates by a quarter-percentage point at each of its last five policy meetings, pushing overnight borrowing costs up to 2.25 percent from a 1958 low of 1 percent. The central bank has said it should be able to stick to a "measured pace" of rate hikes and keep inflation at bay.
"It looks like the economy is still quite healthy and the Fed is probably following the appropriate course," said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis. "The economy doesn't need low interest rates."
Please let me know if you want ON or OFF my General Interest ping list!. . .don't be shy.
Your#15.......It'll, maybe, work out o.k. after the nuclear war?
"Which would you rather have, a government that had 3 trillion dollar a year debt but only spent 1 trillion (zero taxes, just printed money), or one that taxed (e.g.)2 trillion and spent 2 trillion (high taxes but no debt)?"
It sounds more effective now, but the meaning is the same of yours.
WE'RE DOOOOMED!
:^)
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More proof that we're doomed. 
