US economic signals 'mixed'

Mr Bush promoting plans to jump-start the US economy

The US economy as a whole is giving off mixed signals, but the manufacturing sector was still firmly in the grip of recession last month, according to official figures.

The US Federal Reserve's monthly 'beige book' report - an anecdotal survey of business conditions compiled by the Fed's 12 regional banks - suggested that while growth remains fragile, pockets of strength have started to emerge.

"Economic activity remained weak from late November through early January," the report said.

"But while there are still indications of caution, there are also scattered reports of improvement."

Interest rate indicator

The beige book, which the Fed consults in deciding whether to change interest rates, said that demand for housing appears to be firming up, while retail sales also improved in late December and early January.

US car output up in December

Manufacturing, however, remains "weak or down" in most districts, the report said.

In a further sign that a recovery may still be some way off, the beige book reported that employment appears to be falling in most areas, with wages and prices mostly in decline.

The beige book's downbeat picture of the manufacturing sector tallies with the Fed's monthly snapshot of industrial production, released earlier on Wednesday.

The Fed revealed that production in US factories, mines and utilities fell by 0.1% in December, its fifth consecutive monthly decline.

Industrial output for the year as a whole contracted by 3.9%, the steepest decline since 1982.

And manufacturers used just 74.4% of their productive capacity, their lowest level of capacity utilisation in almost 19 years.

Analysts had expected capacity utilisation to rise to 74.6%.

Auto and tech sectors resilient

The car and the hi-tech sectors showed signs of strength, however.

Chipmakers boosted production in December, having already stepped up their output in October.

And car production rose in December for the second month in a row.

"For the second straight month, production was lifted by rising auto output, as the manufacturers sought to replenish inventories," said High Frequency Economics chief economist Ian Shepherdson.

However, with car sales forecast to dip in 2002, the automotive industry's strength remains fragile.