Industries in the US boosted production last month for a fifth consecutive month and housing starts rebounded, showing the world’s largest economy is picking up speed heading into next year, economists said before reports this week.
A 0.5 percent gain in output last month, based on the median estimate of 62 economists surveyed by Bloomberg News ahead of a Federal Reserve report tomorrow, would follow a 0.1 percent October advance. Builders may have broken ground on 579,000 houses at an annual pace, up 9.5 percent.
Fed Chairman Ben Bernanke last week said the economy faces “formidable headwinds,” signaling policy makers may reiterate a pledge to keep interest rates low following their last meeting of the year this week. Gains in consumer spending and lean inventories are prompting companies such as Ford Motor Co to rev up assembly lines, giving the expansion a lift.
“Businesses are scrambling to slow the considerable pace of inventory decline against a backdrop of expanding sales, including rising exports and some pickup in domestic demand,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Part of manufacturing with ties to housing and the consumer will take the handoff from autos and drive manufacturing gains this quarter.”
The Fed’s industrial production figures may show the proportion of plant capacity in use probably rose to 71.1 percent from 70.7 percent, according to the survey median.
Auto sales are climbing again after plunging in September, the month after the government’s “cash-for-clunkers” plan expired. The seasonally adjusted sales rate was 10.9 million vehicles, up from 10.45 million in October, industry figures released this month showed.
Ford, the only major US automaker to avoid bankruptcy, plans to boost first-quarter North American production by 58 percent from a year earlier to 550,000 vehicles.
Manufacturers are benefiting from rising foreign demand as the global economy recovers from the worst slump since World War II. A 12 percent drop in the value of the dollar from a four-year high on March 3 against its major trading partners is making US goods more competitive. Exports have risen for six consecutive months since reaching a three-year low in April.
A report from the Commerce Department on Wednesday may show housing starts rebounded last month after dropping 11 percent in October. Concern over the looming expiration of a government tax credit and the wettest October in more than a century of record-keeping held back builders that month, economists said.
A federal tax credit for first-time homebuyers, due to expire on Nov. 30, was extended last month until April 30 and expanded to include current owners. The incentive had helped boost sales and construction, marking stabilization in the housing market from the worst slump since the 1930s.
The rebound in global growth and the drop in the dollar have also pushed fuel costs up. Consumer prices probably rose 0.4 percent last month on higher gasoline prices, the survey median before a Labor Department report on Wednesday said. Core consumer prices, which exclude food and energy, rose 0.1 percent after a 0.2 percent October gain, the survey showed.
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