US manufacturing got off to a weak start this year as motor vehicle output tumbled in January, but a rebound in factory activity in New York state this month suggested any setback would be temporary. In a further sign the sluggish economic recovery remains on track, consumers were a bit more upbeat early this month even as they paid more for gasoline and saw an increase in taxes reduce their paychecks, other data on Friday showed.
----- Consumer sentiment rises in early February
"The economy is on a slowly improving course and it's got enough headwinds that we are going to see some volatility in these month-by-month numbers," said Jerry Webman, chief economist at OppenheimerFunds in New York. Manufacturing output fell 0.4 percent last month, the Federal Reserve said. But production in November and December was much stronger than previously thought and the 3.2 percent drop in auto output - the largest since August - followed two solid months, suggesting it was just a temporary pause.
In a separate report, the New York Federal Reserve Bank said its "Empire State" general business conditions index, which gauges factory activity in the state, rose to 10.0 from -7.8 the month before. February's index showed the first growth in the sector since July and the best performance since May 2012. The rebound was driven by new orders, which hit their highest level since May 2011. Economists said the pick-up in activity likely reflected recovery from Superstorm Sandy, which struck the East Coast in late October.
Separately, the Thomson Reuters/University of Michigan index of consumer sentiment rose to 76.3 in early February from 73.8 in January. Households drew comfort from steady job gains, which together with rising home and stock prices should help offset a recent increase in payroll taxes and underpin consumer spending. The fairly upbeat sentiment data helped to lift the dollar against the yen, but stocks on Wall Street were little moved, consolidating after a rally that saw the Standard & Poor's 500 index rise nearly 7 percent so far this year.
Last month's weakness in manufacturing contributed to pushing overall industrial production down 0.1 percent. Production at the nation's mines fell 1.0 percent, but cold weather boosted utilities production by 3.5 percent. The need for Americans to spend more money on utilities in January should support consumer spending this quarter. Forecasting firm Macroeconomic Advisers raised their first-quarter growth estimate by a tenth of a percentage point to a 2.5 percent annual rate, which would be a nice step up after a dismally weak fourth quarter.