[02/17/16]  Industrial production in the United States had its largest gain in 14 months in January as manufacturing and utilities output increased, the latest sign that the economy regained some ground early in the year.

While other data on Wednesday showed a surprise decline in housing starts last month, that was probably because of bad weather, especially in the Northeast and Midwest. With building permits ahead of groundbreaking activity, home construction is likely to pick up in the months ahead.

The first increase in industrial output in five months should help allay the fears of a recession that have shaken up the stock market and eliminated bets for an interest-rate increase from the Federal Reserve in March.

Industrial production rose 0.9 percent last month, the largest increase since November 2014, the Fed said. That followed a 0.7 percent decline in December and was helped by a 0.5 percent advance in manufacturing output.

The rise in manufacturing production reflected gains in the output of long-lasting goods, as well as food and chemicals. But manufacturing is not out of trouble and will continue to be buffeted by a strong dollar, weak global demand and lower oil prices.

Industrial production was also lifted by a 5.4 percent surge in utilities production as the return of normal winter temperatures produced a jump in demand for heating. Mining output was flat after four consecutive months of hefty declines.

“The overall tone of this report was encouraging, pointing to a respite in the ongoing recession engulfing the U.S. industrial sector,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

In a separate report, the Commerce Department said groundbreaking activity on new housing projects fell 3.8 percent to a seasonally adjusted annual pace of 1.099 million units last month. Starts dropped in the Northeast, which was blanketed by snowstorms last month, and also tumbled in the Midwest.

Building permits dipped 0.2 percent to a 1.202 million-unit rate last month. Permits remain above starts, indicating that building activity will rebound in the coming months. In addition, housing market fundamentals remain strong, with a tightening labor market starting to push up wage growth.

“We continue to believe that the housing market will be one of the bright spots for the domestic economy in 2016,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina, “reflecting stronger job growth, increased household formations and the current paucity of supply, particularly in the new-home market.”

In another report, the Labor Department said its producer price indexedged up 0.1 percent in January as the cost of services increased, after slipping 0.2 percent in December. In the 12 months through January, the index decreased 0.2 percent, after declining 1 percent in December.

The increase in services was led by a 4 percent gain in margins for machinery and equipment. There were also increases in prices related to securities brokerage and dealing, loan services and apparel.

But energy prices fell 5 percent after sliding 3.5 percent in December. Wholesale food prices rose 1 percent.

Publisher:  Reuters

Link:  http://www.nytimes.com/2016/02/18/business/economy/industrial-production-jumps-as-housing-starts-lag.html?ref=economy