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January 15, 2013 2:46 pm
US retail sales rose and producer prices fell in December, while manufacturing in the New York region contracted in January for the sixth consecutive month, painting a mixed picture of the world’s largest economy.
An improved labour market and an uptick in wages allowed Americans to spend more on clothes, electronics and cars over the holiday season, further fuelled by discounts at chain stores such as Macy’s, a commerce department report showed.
Retail sales in the US posted a 0.5 per cent gain in December following an upwardly revised 0.4 per cent rise the month before. Economists had expected a 0.2 per cent uplift.
But Peter Newland, economist at Barclays, warned that households might soon have to tighten their purse strings as higher payroll taxes cut into their disposable incomes, starting this month. Consumer spending accounts for about 70 per cent of the economy.
Most major categories showed gains last month, led by a 1.6 per cent rise at car dealerships and a 1.4 per cent increase in spend at furniture shops.
Meanwhile, another report showed wholesale prices fell in December for the third consecutive month as food prices dropped the most in more than 18 months.
The labour department’s headline producer price index fell 0.2 per cent last month after a 0.8 per cent fall in November. Economists had expected a 0.1 per cent dip.
Core wholesale prices, which excludes the volatile food and energy components, rose 0.1 per cent, following a 0.1 per cent uptick in November.
Food prices declined 0.9 per cent in December after jumping 1.3 per cent the month prior.
Energy costs slipped 0.3 per cent in after a sharp 4.6 per cent drop in November. Petrol prices declined 1.7 per cent last month following a 10.1 per cent plunge in November.
Also on Tuesday, the Federal Reserve Bank of New York said its Empire State manufacturing index fell to minus 7.78 from minus 7.3 in December.
The index, the earliest indication of monthly performance for the US manufacturing sector, covers production in New York, northern New Jersey and southern Connecticut. Readings below zero indicate contraction.
Fiscal uncertainty at home and lacklustre demand abroad has caused many US companies to pull back on investment. Weakness in manufacturing, which makes up about 12 per cent of the US and about 6 per cent of New York’s economy, has been holding back growth and is outweighing positive momentum in housing and consumer spending.
Although agreement between Congress and President Barack Obama at the start of the year alleviated some anxieties, debate surrounding the debt ceiling continues. The US could default on its obligations if Congress does not increase the borrowing limit.
The manufacturing index’s gauge of new orders fell to minus 7.2 in January from minus 3.4 the month before and a measure of shipments fell to minus 3.1 from 11.9.
The factory employment component rose to minus 4.3 in January from minus 9.7 the month before.
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