Consumer Prices, Factory Output Tick Up: U.S. Economic Takeaways

  • Cost of living climbs most over past year since June 2014
  • Manufacturing improving but doing so at a modest pace

Consumer Prices Rise in U.S. for Fifth Month

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

CONSUMER-PRICE INDEX (DECEMBER)

  • Rose 0.3 percent (matching forecast) after 0.2 percent gain
  • Increased 2.1 percent from December 2015, most since June 2014
  • Core CPI, which excludes food and energy, climbed 0.2 percent for a second month and 2.2 percent from year earlier

The Takeaway: Inflation is perking up. A rebound in energy prices and rising shelter expenses helped deliver the fifth consecutive monthly gain in the CPI. While food costs were little changed for a sixth straight month, airfares climbed by the most since June 2015. Americans also paid more for new and used vehicles. Federal Reserve policy makers considering further interest-rate increases will be encouraged by the broad-based advance in the cost of living, which signals inflation is moving toward their 2 percent goal that’s based on a different, consumption-related measure.

INDUSTRIAL PRODUCTION (DECEMBER)

  • Rose 0.8 percent (forecast was 0.6 percent) after a 0.7 percent decline that was revised from an initial print of a 0.4 percent drop
  • Factory output, which represents about 78 percent of total production, climbed 0.2 percent (forecast was 0.4 percent) after a 0.1 percent drop
  • Utility output jumped 6.6 percent, the most in 27 years, on a return to more seasonable temperatures after a warmer November
  • Factory production was up 0.2 percent in December from a year earlier

The Takeaway: Manufacturing is grasping for a stronger foothold but tepid overseas demand, a strong U.S. dollar and modest investment in equipment from domestic concerns are making for slow progress. While factory output rose at a 0.7 percent annualized rate in the fourth quarter, the fastest since July through September 2015, it was unchanged from a year ago. At the same time, reports measuring sentiment among manufacturers have turned up recently and inventories are better in line with sales, indicating producers will make more headway this year.

NAHB HOMEBUILDER SENTIMENT (JANUARY)

  • Index fell to 67 (forecast was 69) from a revised 69 in December
  • Measure of current sales declined to 72 from 75
  • Index of prospective buyer traffic eased to 51 from 52
  • Six-month sales outlook gauge dropped to 76 from 78

The Takeaway: Even with the decline, builder sentiment is hovering near the highest since July 2005 on optimism that a Trump administration and lawmakers on Capitol Hill will lower regulatory barriers to development. The National Association of Home Builders is anticipating 10 percent growth in one-family home construction this year despite headwinds that include higher borrowing costs for purchasers, a tight labor market in construction and a lack of buildable lots.

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