U.S. factory output jumps 0.6%

Plants ramp up production of vehicles, electronics

FILE - In this Thursday, Oct. 10, 2013, file photo, employees at Sheffield Platers Inc. work on the factory floor in San Diego. The government issues its second and final estimate of worker productivity and labor costs in the July-September quarter on Monday, Dec. 16, 2013. (AP Photo/Lenny Ignelzi, File)
FILE - In this Thursday, Oct. 10, 2013, file photo, employees at Sheffield Platers Inc. work on the factory floor in San Diego. The government issues its second and final estimate of worker productivity and labor costs in the July-September quarter on Monday, Dec. 16, 2013. (AP Photo/Lenny Ignelzi, File)

WASHINGTON - U.S. factories increased output in November for the fourth straight month, led by a surge in auto production. The gains show manufacturing is strengthening and could help economic growth at the end of the year.

Factory production rose 0.6 percent in November after a 0.5 percent gain in October, the Federal Reserve said Monday.

“It does suggest that the manufacturing sector is gaining a little bit of momentum,” said David Sloan, a senior economist at 4CAST Inc. in New York, who projected a 1.2 percent jump in overall production. “You’ve got a decent underlying picture of respectable, if not terribly rapid, growth.”

Production of motor vehicles and parts increased 3.4 percent, rebounding from a1.3 percent decline in October. Factories also stepped up production of home electronics and chemical products.

Industrial production, which includes manufacturing, mining and utilities, rose 1.1 percent in November. It was the fourth straight gain.

Colder-than-average temperatures drove a 3.9 percent surge in utility production. Mining output jumped 1.7 percent to reverse a similar decline in October.

Overall production for the first time surpassed the pre-recession peak set in December 2007, the month the recession began. Output is now 21 percent above its recession low in June 2009, the month the downturn ended.

The report of healthier output at U.S. factories helped drive a rally on Wall Street on Monday. The Dow Jones industrial average rose 129.21 points to close at 15,884.57.

Paul Dales, senior U.S. economist at Capital Economics, said the gains in mining and utilities can be volatile. He said the best guide of the underlying trend is manufacturing output.

“It suggests that producers are benefiting from stronger demand at home and overseas,” Dales said.

Factories are busier in part because overseas growth has picked up and the housing recovery has driven up demand for furniture and other wood products. Automakers are also having their best year for sales since the recession.

Separately, the Federal Reserve Bank of New York said manufacturing in the New York region grew for the sixth time in the past seven months, although the gains were modest.

The solid gains at U.S. factories follow other positive signs for manufacturing last month.

A closely watched report from the Institute for Supply Management showed factory activity climbed in November at the fastest pace in 2½ years. Factories ramped up production, stepped up hiring and received orders at a healthy clip.

And the government’s November employment report showed factories added 27,000 jobs last month, the fourth straight month of gains and the most since March 2012.

The pickup at factories could help an economy that is starting to accelerate.

The U.S. economy grew at an annual rate of 3.6 percent in the July-September quarter. Nearly half of the growth came from a buildup in business stockpiles, which can be volatile.

Consumer spending slowed to the weakest pace since the end of the recession. But that was mostly because of a decline in utility spending. Spending on goods rose at the fastest pace since early 2012.

Companies could slow their inventory growth in the October-December quarter if they don’t see enough demand from consumers. That would weigh on overall economic growth.

Many economists are predicting growth will slow to an annual rate of between 2 percent and 2.5 percent.

Still, a recent government report showed restocking rose in October at the fastest pace in nine months. At the same time, consumers stepped up spending at retail businesses in November. If those trends continue, growth could be stronger.

U.S. workers boosted their productivity from July through September at the fastest pace since the end of 2009, adding to signs of stronger economic growth.

In a separate report, the Labor Department said Monday that productivity increased at a 3 percent annual rate in the third quarter. That’s up from an initial estimate of 1.9 percent and much stronger than the 1.8 percent rate from April through June.

Productivity rose because economic growth was much stronger than previously estimated in the third quarter. Productivity is the amount of output per hour of work.

Labor costs fell in the third quarter, evidence that inflation will remain low.

Higher productivity enables companies to pay employees more without sparking inflation. But greater productivity can also slow hiring if it shows companies don’t need more workers to boost output.

However, productivity growth has been mostly flat over the past year. That’s because the gains from the past six months have been offset by declines in the previous six months.

Information for this article was contributed by Martin Crutsinger and Josh Boak of The Associated Press and Victoria Stilwell of Bloomberg News.

Business, Pages 23 on 12/17/2013

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