Factory output up, but housing stagnates

WASHINGTON - Factory production climbed in January for a fifth consecutive month, while builders began work on fewer single-family houses, showing the economy's expansion remains driven by manufacturing as housing stagnates.

Manufacturing output increased 0.3 percent after a revised 0.9 percent jump in December that was more than twice as large as previously reported, figures from the Federal Reserve showed Wednesday. Total production, including mining and utilities, unexpectedly dropped. Single-family home starts decreased 1 percent to an annual pace of 413,000, the fewest since May 2009, according to the Commerce Department.

Business investment in new equipment and improving global sales has led to better-than-expected earnings at manufacturers like Dell Inc. By contrast, builders are contending with a surfeit of unsold properties as unemployment hovers around 9 percent and foreclosures mount.

"Manufacturing has been an important contributor to growth, and it'll get stronger," said Jim O'Sullivan, global chief economist at Manhattan-based MF Global Inc. "Given the still-huge glut of housing inventories, new-home building is unlikely to contribute to the economy in any meaningful way this year." Economists had forecast a 0.5 percent gain in overall production, according to the median estimate of 80 economists surveyed by Bloomberg News. Projections ranged from a drop of 0.5 percent to an increase of 0.9 percent.

The Fed's report also showed total production was unexpectedly restrained by a decline in utilities as milder temperatures curbed demand for heating. Output fell 0.1 percent after a 1.2 percent increase in December.

Mining production, which includes oil drilling, decreased 0.7 percent last month. Utility output fell 1.6 percent after a 4.1 percent increase the prior month.

Automakers are benefiting from rising sales. Output of motor vehicles and parts jumped 3.2 percent in January after rising 0.2 percent a month earlier. - AP