Following a harsh winter that saw the economy experience a downturn, new data indicates that industrial production in the United States is gaining some momentum as it rose more than what was forecasted in the month of March.
The Federal Reserve released figures Wednesday that highlighted output at factories, mines and utilities increased 0.7 percent in March after a modified 1.2 percent jump in the previous month. Manufacturing, meanwhile, also received a 0.5 percent boost following a 1.4 percent increase in the month prior.
According to a Bloomberg survey of economists, the median forecast was only an overall 0.5 percent increase.
“Manufacturing wasn’t immune to the weather effect, so we’ll continue to see some bounce back in the next few months,” Ryan Sweet, senior economist at Moody’s Analytics Inc. told Bloomberg Newsbefore the release of the central bank’s report. “It’s similar to what we’re seeing in the rest of the economy. Underlying demand is improving.”
Previous economic data discovered retail sales and employment are on the rise and a signal that the economy and businesses are thawing out during warmer temperatures. In addition to higher demand, corporate investment and foreign market improvements contributed the uptake in financial statistics.
Construction Data
On the same day, the Department of Commerce published a report that showed home building was up in March as construction companies resumed their work once the weather started improving. However, building permit applications fell, which makes the outlook for future construction quite foggy.
Builders began working on 946,000 homes at a seasonally adjusted annual rate in March, up 2.8 percent from 920,000 in the previous month. Construction projects of single-family homes soared 6 percent, more than offsetting a 3.1 percent decline in the construction endeavors of apartments, condominiums, and town houses.
Permit applications dropped 2.4 percent to a seasonally adjusted annual rate of 990,000.
Federal Reserve’s Interest Rates
In her second public speech as head of the Federal Reserve, central bank chair Janet Yellen announced that interest rates will remain low until the economy gets better when compared to its employment and inflation objectives.
“I hope it’s completely clear that while monetary policy is very accommodating at this point, and I focused on the need to keep it so or to adjust it to make sure the recovery remains on track,” Yellen said during a question-and-answer period at the Economic Club of New York. “As the recovery proceeds and healing occurs, it’s obvious that we will need to tighten monetary policy to avoid overshooting our target.”
After Yellen delivered her remarks, the stock market maintained its gains it made during the morning trading session, including Nasdaq’s one percent hike. The five-year Treasury note saw buying ahead of her oration.
Price Inflation
Despite the Federal Reserve and other central banks making the case that inflation is tame, new numbers are highlighting the fact that price inflation is here, particularly when it comes to food and groceries.
In the months of February and March, food prices surged 0.4 percent, much higher than the overall consumer price index bump of 0.1 percent in February and 0.2 percent in March. This is a terrible sign for the economy, says one economist.
“Living standards will suffer, as a larger percentage of household budgets are spent on grocery store bills, leaving less for discretionary spending,” Chris Christopher, an economist at IHS Global Insight, told USA Today.
A wide variety of food products have risen substantially over the past year, including chicken, beef, eggs and pork.
This has led J.P. Morgan Chase to warn that global price inflation is on the cusp of significantly increasing over the next year.
