Manufacturing output jumps on big gains in production of autos, machinery

February 15, 2012

Manufacturing plants boosted output last month and December ended up being the best month of growth for these facilities in five years, The Associated Press reported.

Strong auto sales and growing business investment in machinery and other equipment are helping the economy grow and keeping manufacturing plants busy. The Federal Reserve announced that total production for the sector increased 0.7 percent in January, along with a revised 1.5 percent rise for December, according to the news outlet.

This revised number marked the biggest one-month gain for the sector since December 2006, and business strategy may begin to shift toward increased production to meet a growing demand.

The AP reported that overall industrial production remained flat in January, but this reading was due to the fact that Americans used less energy during an unseasonably warm winter.

Bloomberg reported that manufacturing strategy may be affected by a rise in business investment for the production of new equipment and the need to rebuild inventories, as this is expected to keep assembly lines rolling in 2012.

"Manufacturing is doing pretty well," Tom Simons, an economist at Jefferies & Co. Inc. in New York, told the news outlet. "It will continue to play a driving roll in the economy. Global demand is holding up pretty well, we’re still rebuilding inventories and autos remain a significant leader in the factory recovery."

Bloomberg reported that the Fed's national report for January showed that output of motor vehicles and parts jumped 6.8 percent, and manufacturing excluding autos and parts rose by a margin of 0.3 percent following the 1.3 increase posted for December.

Production of business equipment rose 1.8 percent, boosted by a higher output for computers and transportation gear.

Economist Jonathan Basile told the AP that the positive numbers for the sector would likely continue for the next several months, as he noted the regional surveys may show a continued rise in hiring and output.

"It looks like we’re set up for a little faster growth in the coming months," Basile noted.

The AP reported that factory output has risen 16.7 percent from its low point during the financial crisis, and is closing the gap on the numbers posted during its December 2007 peak.

"The manufacturing sector is on a tear," Paul Ashworth, an economist at Capital Economics, penned in a note to clients.