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WRAPUP 3-U.S. manufacturing stumbles but seen regaining footing
February 15, 2013 / 3:15 PM / 5 years ago

WRAPUP 3-U.S. manufacturing stumbles but seen regaining footing

* Manufacturing falls 0.4 percent on weak autos assembly
    * New York state factories bounce back in February
    * Consumer sentiment rises in early February

    By Lucia Mutikani
    WASHINGTON, Feb 15 (Reuters) - U.S. manufacturing got off to
a weak start this year as motor vehicle output tumbled in
January, but a rebound in factory activity in New York state
this month suggested any setback would be temporary.
    In a further sign the sluggish economic recovery remains on
track, consumers were a bit more upbeat early this month even as
they paid more for gasoline and saw an increase in taxes reduce
their paychecks, other data on Friday showed.
    "The economy is on a slowly improving course and it's got
enough headwinds that we are going to see some volatility in
these month-by-month numbers," said Jerry Webman, chief
economist at OppenheimerFunds in New York.
    Manufacturing output fell 0.4 percent last month, the
Federal Reserve said. But production in November and December
was much stronger than previously thought and the 3.2 percent
drop in auto output - the largest since August - followed two
solid months, suggesting it was just a temporary pause.
    "Given that most of the weakness was due to the give-back in
motor vehicle production after the 11 percent surge in activity
during the last two months of last year, we expect this retreat
in industrial output to be temporary," said Millan Mulraine,
senior economist at TD Securities in New York.
    In a separate report, the New York Federal Reserve Bank said
its "Empire State" general business conditions index, which
gauges factory activity in the state, rose to 10.0 from -7.8 the
month before. February's index showed the first growth in the
sector since July and the best performance since May 2012.
    The rebound was driven by new orders, which hit their
highest level since May 2011. Economists said the pick-up in
activity likely reflected recovery from Superstorm Sandy, which
struck the East Coast in late October.
    "What we are seeing in manufacturing is that growth that had
been leading the economy is now roughly keeping pace with the
overall economy and that's likely to remain the case through
2013," said Gus Faucher, senior economist at PNC Financial
Services Group in Pittsburgh.
    Separately, the Thomson Reuters/University of Michigan index
of consumer sentiment rose to 76.3 in early February from 73.8
in January.
    Households drew comfort from steady job gains, which
together with rising home and stock prices should help offset a
recent increase in payroll taxes and underpin consumer spending.
    "Consumers are getting over the fact that their paychecks
are a little smaller since the beginning of the year due to the
sunset of the payroll tax holiday," said Thomas Simons, an
economist at Jefferies & Co. in New York.
    "This offers some encouragement that consumption will
recover following a weak month in January." 
    The fairly upbeat sentiment data helped to lift the dollar
against the yen, but stocks on Wall Street were little moved,
consolidating after a rally that saw the Standard & Poor's 500
index rise nearly 7 percent so far this year.
    Last month's weakness in manufacturing contributed to
pushing overall industrial production down 0.1 percent.
    Production at the nation's mines fell 1.0 percent, but cold
weather boosted utilities production by 3.5 percent. The need
for Americans to spend more money on utilities in January should
support consumer spending this quarter.
    Forecasting firm Macroeconomic Advisers raised their
first-quarter growth estimate by a tenth of a percentage point
to a 2.5 percent annual rate, which would be a nice step up
after a dismally weak fourth quarter.

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