Last Wednesday, the stock market scored most of its weekly gains, buoyed by the Fed’s report that industrial production rose by 0.4% in December compared to November — and 3.1% over the last year. Capacity utilization also rose to 78.1% in December, up from 77.8% in November. Due to unseasonably warm weather in December, utility output declined 2.7%. So December’s industrial production would have been even better if we had worse weather. Finally, the manufacturing sector rose 0.9% last month. These numbers naturally bode well for fourth-quarter GDP growth, which will be announced on Friday, Jan. 27.
Don’t look now, but with all this positive market news, the S&P 500 is 22% above its early-October lows. Back then, as Q4 was just beginning, there was widespread talk of a double-dip recession. But for now, it looks as if Q4 GDP growth will be over 3%. Friday’s figure will be subject to sizable future revisions, of course, but we could end this month on a strong note if Friday’s preliminary figure indicates growth of more than 3%.
On the jobs front, the Labor Department announced on Thursday that new weekly unemployment claims declined by 50,000, to 352,000 — the lowest weekly jobless claims since April 2008. The four-week average of new jobless claims fell 3,500, to 379,000, reflecting steady improvement in the job market.
There was also good news on the inflation front. On Wednesday, the Labor Department announced that the Producer Price Index (PPI) declined 0.1% in December, while the core PPI, excluding food and energy, rose 0.3%. The primary culprits for higher core prices were a 0.9% jump in light-truck prices, a 1% rise in tobacco prices, and a 1.2% surge in prescription-drug costs. On Thursday, we learned that the Consumer Price Index (CPI) was unchanged in December and that the core rate rose 0.1%. Energy prices declined 1.3%, while food prices rose 0.2%. In the past 12 months, the core CPI has risen just 2.2%.
I couldn’t be happier with this positive economic news. Let’s hope the next numbers we crunch don’t end up breaking our teeth.