Positive Signs for the Holiday Season
The November report on industrial output gains adds to encouraging evidence of an improving economy. Total industrial production (which includes manufacturing, mining, and utilities) grew by a much stronger than expected 1.1 percent. The healthy 0.6 percent growth in manufacturing output adds to recent evidence that the factory sector is not only shaking its spring and summer doldrums but that the recovery is broadening. Moderately strong recent activity in the nondurable sector, for so long a laggard, suggests that the factory recovery has more than one leg to stand on. This is nicely reinforced by a turnaround from recent signs of weakening in housing related industries such as wood and furniture.
The troubled policy and global climates are starting to show supportive signs of light. The world growth picture is slowly becoming more balanced between strength and weakness. Good signs from two large economies, the United Kingdom and Japan, are certainly encouraging. The recovery picture in the Eurozone, by contrast, is still fraught with challenge, as is the recovery in large emerging market economies.
Further, while careful attention must be paid in the coming weeks, it looks as if the fiscal and monetary policy outlook in the U.S. will become slightly clearer, a boon to business investment. Under the weight of world and policy challenges, U.S. manufacturing growth is unlikely to boom in 2014. But for the first time in a long time, the balance between positive and negative risks is moving in a favorable direction.