According to a recent NY Times article the United States ended the 2012 year with factory output up and low inflation. This year’s tax increases, aimed to reduce the deficit, may put a damper on consumer spending. However, the NY Times has interpreted the low rate of inflation, which lifted consumer purchasing power, as a signal “that the economy may weather this year’s higher taxes.” Millan Mulraine, an economist at TD Securities, believes that the increase in factory and manufacturing output we have observed at the end of 2012 could be “a reflection of a broader pickup in overall economic activity.”
In fact, Mulraine is not the only one to have noticed this pickup in economic activity. The Fed’s most recent Beige Book reported, “Economic activity has expanded since the previous Beige Book report, with all 12 districts characterizing the pace of growth as either modest or moderate.” While the US economy has in fact improved over the last month, primarily due to home and auto sales, labor market conditions remained unchanged and unemployment showed few signs of improvement. Bloomberg’s “Fed Sees Economy Picking Up Across U.S. in Beige Book Survey” hopes the report, prepared for the Jan. 29 FOMC meeting, will inspire policy makers to continue with the Fed’s proposed $85 billion in monthly bond purchases until a substantial improvement in the labor market occurs. In a telephone interview with Bloomberg News, Boston Fed President Eric Rosengren said the Fed could expand its $85 billion monthly bond buying should record easing not make progress in achieving full employment and stable prices.
With the economic pickup reported in the most recent beige book, with the central bank’s most recent meeting where policy makers debated when it would be appropriate to stop purchases, and with the proposed $85 billion in monthly bond purchases to stimulate the labor market, it may be time to ask ourselves: “Are things finally looking up for our economy?”