U.S. Industrial Output Rises for a Second Month; Consumers More Confident
U.S. Economy: Consumers Confident, Production Rises
from Bloomberg
By Monee Fields-White and Siobhan Hughes
Washington, March 15 (Bloomberg) -- U.S. consumer confidence rose in March to its highest level in 15 months and factories stepped up production in February, giving a boost to the economy's rebound.
``I do believe the worst is behind us,'' said Dieter Zetsche, chief executive of DaimlerChrysler AG's Chrysler Group, in an interview. ``The issue which is still to be answered is whether we will see a steep recovery or a slower one. Probably it's somewhere in the middle.''
The University of Michigan's consumer sentiment index jumped to 95 in March, the highest since December 2000, from 90.7 in February. That may underpin spending as the economy bounces back from a recession that began a year ago and explains why central bankers are expected to begin raising interest rates by midyear.
Last month's 0.4 percent increase in production at the nation's factories, mines and utilities followed a 0.2 percent gain in January and was the largest since June 2000, Federal Reserve figures showed. It was the first back-to-back increase since August-September 2000.
``We made the turn,'' said Paul Kasriel, director of economic research at Northern Trust Corp. in Chicago. ``The recovery in manufacturing has begun and it's going to build momentum as we move through the first half of the year.''
While the Fed's policy-setting Open Market Committee will probably leave the benchmark overnight bank lending rate at a 40- year low of 1.75 percent next week, it may decide that the economy no longer faces a bigger risk from slower growth than it does from rising inflation.
Greenspan
In testimony to the Senate a week ago, Fed Chairman Alan Greenspan said the economy is now ``moving through a turning point'' from the recession that began in March of last year.
Stocks and copper prices gained as the reports provided more evidence the recession may be over. The Dow Jones Industrial Average rose 90 points, or 0.9 percent, to close at 10607.23, its fifth straight weekly gain. The Standard & Poor's index of 500 stocks gained 13 points, or 1.1 percent, to close at 1166.16. Copper rose 0.55 cent to 75.05 cents per pound. Expectations for a pickup in industrial use of copper have boosted prices by one- fourth from a 14-year low in November.
The 4 7/8 percent Treasury note that matures in February 2012 rose 1/2 point, pushing down its yield 7 basis points to 5.33 percent as investors increasingly expect the Fed to raise interest rates to keep inflation in check.
Producer Prices
A report from the Labor Department showed the producer price index rose 0.2 percent in February after a 0.1 percent January gain. Excluding food and energy, the index was unchanged.
The University of Michigan sentiment index is based on a phone survey of about 500 households. Confidence matters because it's tied to consumer spending, which accounts for two-thirds of the economy.
Manufacturers including General Motors Corp. are starting to increase production to meet demand after businesses had reduced inventories in the fourth quarter at a record $120 billion pace.
``Businesses have revised their production schedules now that the economy's prospects are looking brighter,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd.
Work at factories, which accounts for almost 90 percent of total U.S. industrial production, increased 0.3 percent in February, matching the gain in the previous month. The consecutive monthly increase was the first since May-June 2000.
Parts and Materials
Production of parts and materials, used to make goods and which account for more than a third of all production, rose 0.6 percent in February after a 0.8 percent increase. Paper production increased 0.4 percent after a 2.6 percent rise.
The plant-use rate rose to 74.8 last month from 74.5 in January. The February rate was the highest since 75 in October of last year. Electric and gas utility production increased, while mining output declined.
Production of durable goods, which include automobiles, furniture and electronics, rose 0.4 percent for a second straight month. Autos and auto parts production rose 0.5 percent after falling 0.1 percent in January.
General Motors, the largest U.S. automaker, said last week it had scheduled overtime at 10 North American factories to boost production by 20,000 trucks and some cars in the first quarter to meet rising demand.
Production of computers, communications equipment and semiconductors increased 1.2 percent after rising 1.7 percent in January.
Dell Computer
Dell Computer Corp., the largest personal computer maker, said this month that its fiscal fourth-quarter profit rose 5.1 percent, reflecting stronger consumer sales. What's more, corporate PC sales may revive in the second half of 2002, Chairman and Chief Executive Michael Dell said.
``We're fairly bullish on what can happen this year,'' said Kevin Rollins, Dell's chief operating officer in an interview with Bloomberg Television this month. ``We saw a few glimmers in our fourth quarter that suggested there's a little bit of an uptick.''
Agilent Technologies Inc. is also seeing improvements. The Palo Alto, California-based maker of electronics test and measurement tools said last week that orders rose 20 percent last quarter from the prior three months, the first gain after five periods of decline.
The economy probably will expand at a 2.6 percent annual pace between January and March after growing at a 1.4 percent rate in the fourth quarter, according to the latest consensus forecast in the Blue Chip Economic indicators survey. That's up from a 1.6 percent growth forecast last month and would be the strongest rate since a 5.7 percent pace in the second quarter of 2000.
The recent improvement in the economy has some manufacturers forecasting and preparing for better days this year. Maytag Corp., the third-largest appliance maker, this week raised its earnings forecast for the first quarter and year because the company sold more high-price washers, dryers and vacuums.
Sales this quarter will rise about 20 percent from a year earlier as consumers buy more high-price products, company spokesman James Powell said.
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