Factory Output Climbs, Home Starts Ease: U.S. Economic Takeaways

  • Production boosted in January by strength in consumer goods
  • New housing construction declines to three-month low

What you need to know about Wednesday’s U.S. economic data:


  • Rose 0.9 percent (0.4 percent forecast), most since November 2014 and first advance since July
  • Manufacturing output climbed 0.5 percent, the most in six months
  • Utility output surged 5.4 percent, the biggest gain since December 2009, on return of colder weather, while mining was unchanged
  • Production at factories up 1.2 percent YoY, mining down 9.8 percent and utilities off 2.8 percent

The Takeaway: The January data offer a glimmer of hope that the worst of the manufacturing downturn is over. Resilient domestic demand is helping to stabilize output. The report showed output of consumer goods climbed 1.6 percent, the second-biggest advance since May 2010, with production of durables such as autos and electronics and nondurables picking up. While the stronger dollar and malaise in overseas markets is likely to weigh on exports for some time, the fallout seems to be diminishing.


  • Fell to a three-month low 1.1 million annualized rate (1.17 million forecast)
  • Single-family home construction declined 3.9 percent, multifamily projects decreased 3.7 percent
  • Building permits little changed at 1.2 million pace, matching median estimate
  • Starts dropped in all four U.S. regions, led by 12.8 percent slump in Midwest

The Takeaway: New-home construction lost some steam at the start of the year, offering little comfort that housing will kick the economy into a higher gear while global growth languishes. Weather also took a toll as the fourth-most impactful storm in more than a half-century slammed the Mid-Atlantic and Northeast in late January. But little change in building permits points to few prospects for more sizeable advances in construction. While job growth and cheap borrowing costs are poised to underpin the industry in 2016, tighter credit standards for some borrowers are keeping those would-be buyers sidelined.


  • Rose 0.1 percent after 0.2 percent decline
  • Food costs increased 1 percent, while energy prices sank 5 percent
  • Wholesale prices excluding food and fuel advanced 0.4 percent, the most since October 2014

The Takeaway: The PPI report indicates inflation started the year on firmer footing, which should be welcome news to Federal Reserve policy makers as costs have been undershooting their target for more than three years. The headline producer-price index was propped up by the largest jump in food prices since May, which overshadowed a plunge in wholesale energy costs. Stripping out these two volatile components, the gain in the index was still stronger than economists projected. The advance was due entirely to higher wholesale services costs. Meanwhile commodities prices excluding food and energy were flat for the month, reflecting “broad softness in line with continued weakness in global tradable goods prices and continued dollar strength,” according to Ted Wieseman, an economist at Morgan Stanley & Co. in New York.

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