Easing fears about inflation in the US, wholesale prices fell by the largest amount in 20 months in December, aided by a big decline in the cost of energy.
In other good economic news, output at the US' beleaguered manufacturing companies rose strongly last month, helping factories enjoy their first annual increase in output since 2000.
Analysts said Friday's reports depicted an economy that began the new year on a good footing with mild inflation and signs of strength in the long-suffering manufacturing sector, which has seen the loss of 2.7 million jobs over the past four years.
"These are very positive reports showing solid production at year's end with moderating inflation," said Mark Zandi, chief economist at Economy.com.
The Labor Department's Producer Price Index, which tracks inflation before it reaches the consumer, posted a decline of 0.7 percent last month as gasoline and other energy prices plunged by 4 percent, the biggest drop since April 2003.
Meanwhile, the Federal Reserve said industrial production rose by 0.8 percent in December, far above the modest 0.2 percent rise in November. Manufacturing production was up 0.7 percent during the month while output at utilities rose by 2.7 percent and mining saw a 0.4 percent increase.
For the year, industrial production rose by 4.1 percent, the best showing since 2000 and a sharp turnaround from the past three years when production either fell or was flat.
"Manufacturing has finally broken out of its slump," said David Huether, chief economist at the National Association of Manufacturers, noting that last year's rebound was broad-based with growth in 16 of 19 major industries.
Huether predicted further strong gains in factory output this year as businesses boost capital spending and the decline in the value of the dollar against other currencies helps to boost exports.
However, David Wyss, chief economist at Standard & Poor's in New York, noted that the trade deficit is still worsening as domestic manufacturers continue to be battered by imports.
"I think we are through the worst of manufacturing's troubles although we are still not seeing much in the way of actual strength, especially in employment growth," he said.
The better-than-expected 0.7 percent drop in wholesale prices last month, the biggest decline since a 1.5 percent fall in April 2003, followed sharp increases of 1.7 percent in October and 0.5 percent in November, gains that were propelled by skyrocketing energy prices.
The 4 percent drop in energy prices in December reflected unusually warm weather, especially in the Northeast where there is a heavy reliance on home heating oil.
But analysts cautioned that energy prices rebounded again this week amid worries about upcoming cold weather, the turmoil in Iraq and a dip in crude oil and heating oil inventories.
For all of last year, wholesale prices rose by 4.1 percent, up slightly from a 4 percent increase in 2003. Both years recorded the biggest wholesale inflation increases since a 5.7 percent surge in 1990, another year when turmoil in the Middle East sent world oil prices soaring.
Outside of the volatile energy and food sectors, inflation was better behaved with the so-called core rate of wholesale inflation rising by just 2.2 percent last year, up from a 1 percent increase in 2003.
Analysts said the performance of core inflation should satisfy Federal Reserve policy-makers that despite the jump in energy prices last year, inflation is not threatening to get out of control. Many economists predicted that the Fed would keep raising interest rates at a moderate pace of quarter-point moves this year.
Food prices at the wholesale level edged up a tiny 0.1 percent in December after rising by 0.4 percent in November. The price moderation reflected a big 26.4 percent drop in the cost of vegetables, the biggest decline since April 2002, which offset price increases in other foods.
Outside of food and energy, prices in December rose by a slight 0.1 percent, following a gain of 0.2 percent in November. This slowdown in core inflation reflected a lower auto prices which fell as automakers again offered more attractive discounting incentives.
In another report Friday, the Commerce Department said that inventories held by businesses on shelves and backlots rose by 1 percent in November. That reflected in part a slowdown in sales, which rose by only 0.4 percent after a much bigger 1.4 percent October increase.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts