It’s no secret that more Americans are shopping online, but the speed at which sales are moving to the Web is striking.

According to a recent report from the Commerce Department, $61.8 billion of retail sales were transacted on the Internet in the fourth quarter of last year. That represented a 16% increase from 2010 and accounted for 5.5% of all retail activity over the holiday period. E-commerce’s market share has soared eightfold since 1999, and even over the deep recession only experienced a brief lull not a retreat.

Online shopping is particularly popular during the holidays, but even accounting for seasonal variation nearly 5 cents of every retail dollar spent went online. And that figure leaves out money spent on services like travel, financial brokers or ticket agencies.

“Cyber sales are soaring since more people feel comfortable buying online, and the real game changer this past holiday season has been the increased use of smart phones, tablets, and iPads to shop online,” said economist Chris Christopher of IHS Global Insight. “Online retailers are starting to make a dent in the brick-and-mortar business model. Many chain stores are looking to cyber space to supplement weak in-store sales.”

This is especially true of retailers that sell media or electronics. A separate Commerce report shows that sporting goods, hobby, book, and music stores have seen their share of all retail sales flat-lining at around 2%, while electronics and appliance stores also are losing share — down to 2.1% from 2.5% prior to the recession. Things look even worse for brick-and-mortar establishments when you take into account that their online sales are counted in that report. Take away their Web sales and their share of all retail sales is surely falling.

But there are still some brick-and-mortar retailers who have little to fear from the Internet. In the fourth quarter of 2011, gas stations represented 11% of all retail sales, up from 10% during the recession and 7% in 1999. Part of that is due to rising prices at the pump, but gas also is something you still have to go out to purchase.

Of course, the more people can do from home the less use they will have for their cars. So maybe gas stations aren’t totally immune after all.

Baucus plans to meet with President Dmitry Medvedev, as well as Russia’s trade and foreign ministers, to prepare for a difficult debate that stands to broaden far beyond trade to address ongoing concerns about the former Cold War foe’s actions on Iran, Syria and human rights.

The goal is to restore “permanent normal trade relations” before the accession – already approved by WTO members – goes into effect so that U.S. companies aren’t at a competitive disadvantage. That will require revoking restrictions in place since 1974 under a measure called Jackson-Vanik, which effectively denied the Soviet Union permanent normal trade status due to past emigration restrictions.

“We’re certainly viewing August, potentially even earlier, as the deadline for Russia to get in, and that’s the deadline by which U.S. companies will start to lose out to our competitors,” a Baucus aide said in an interview. “So we would very much like to get it done by the end of the summer.”

U.S. Trade Representative Ron Kirk has also set his sights on lifting the restrictions by summer’s end, expressing confidence that lawmakers won’t want to hurt U.S. exporters in order to send a message to Moscow.

The administration has picked up its effort to build support for the measure, most notably with Russian trade getting a mention in President Barack Obama’s State of the Union address last month.

“We’re gearing up for an engagement with the Hill,” Philip Gordon, assistant secretary of State for European and Eurasian affairs, told the American Chamber of Commerce in Russia on Friday.

But Gordon said that while it is clearly in the U.S. interest to lift the restrictions, “you just can’t be sure” that logic will prevail in Congress.

Raising the possibility that lawmakers will make some demands on human rights in return for repealing Jackson-Vanik, he said the administration is taking appropriate action on that front. But he added, “We’ll see what they demand.”

Sen. Ben Cardin (D., Md.) and other lawmakers have pushed recently to incorporate measures from a recent bill he introduced, to impose a travel ban and possible asset freeze against serious human-rights violators, as part of any legislation to lift the Jackson-Vanik trade restrictions, according to another aide.

The business community has also “come out in full force,” going on the Hill to make it clear Russia is a priority, said the Baucus aide.

A business coalition–whose members include major groups such as the U.S. Chamber of Commerce and National Association of Manufacturers as well as multinationals such as Boeing Co. and General Electric Co., announced earlier this month that restoring trade relations with Russia will be the top trade priority this year.

But key lawmakers such as Rep. Kevin Brady (R., Texas), who chairs the House Ways and Means trade subcommittee, have warned that the vote will be a heavy lift.

Sen. Orrin Hatch (R., Utah), the top Republican on the Finance Committee, he’ll need to examine the details of Russia’s access and the implications of lifting Jackson-Vanik. Calling Russia’s record on human rights and respect for the rule of law “spotty at best,” Hatch warned that lawmakers shouldn’t view the issue “solely through Kremlin-colored glasses.”

Some lawmakers may not want to be seen as indirectly rewarding Russia for blocking stronger international action against Syria and Iran, while Republicans may be wary about handing Obama any legislative victories in an election year. Concerns about reported voting irregularities in the recent parliamentary, as well as widespread protests ahead of the Russia’s presidential elections next month, also make for bad timing for a congressional debate over Russia.

Baucus is expected to schedule a hearing on Russian trade sometime next month, with legislation to restore permanent trade relations potentially introduced in the next couple of months, the aide said.

“Holding Russia to its promises as it enters the WTO and seeking a greater share of the Russian market is a one-way economic benefit for the United States and an absolute no-brainer,” said Baucus in a statement. “This trip will help lead Russia to end its unfair trade practices that hurt American businesses, ranchers and farmers.”

U.S. exports to Russia could double within five years, from around $9 billion, he said.

To prepare, he plans to meet not only with Russian officials, but also U.S. and Russian business executives as well as civil society and pro-democracy groups. Baucus isn’t planning to meet with Prime Minister Vladimir Putin, who is widely expected to return to office in March for a third term as president.

“The focus of the trip will be mainly economic, what it will mean for the U.S. economy and U.S. jobs to have this important market open for our exporters,” the aide said. “And also getting up to speed on the non-economic issues, that while not strictly part of the PNTR legislation, no doubt will surround the debate in the Congress.”

While Russia addressed many U.S. demands in winning support to join the WTO, Baucus plans to try to address some lingering concerns about agriculture, such as nontariff barriers that restrict pork imports, the aide said.

One of the most interesting takeaways from the White House’s annual “Economic Report of the President” released Friday afternoon was its call for new data based on the changing complexion of both the economy and the job market.

Each of the 446-page book’s eight chapters highlights either an emerging area of developed data or the need for new data in a specific area.

Here are some examples of what the White House called for:

Chapter 1: To Recover, Rebalance, and Rebuild

Data needed: “Innovative statistics based on electronic records compiled as a byproduct of commercial activity can also be informative. Adding series based on Google Trends to economic forecasting models, for example, can improve those models’ predictive powers. The number of search queries for a particular make of automobiles in the last two weeks of a month, for instance, turns out to be a good predictor of sales of that car, and the number of searches for real estate agencies is one of the best predictors of current home sale.”

Chapter 2: The Year in Review and the Years Ahead

Data needed: “Despite recent innovations in the collection of primary source data, there are still conceptual issues pertaining to the appraisal and definition of services that remain unresolved. As an example, improvements in health care have contributed to longer life spans and better quality of life, but there is not a consensus about how to value and incorporate these benefits in a national income accounting framework.”

Chapter 3: Restoring Fiscal Responsibility

Data needed: “Differences in government accounting practices an in the types of assets held by central governments complicate the comparison of government debt across countries. These complications can lead to confusion over the most appropriate measure of government debt and the relative levels of debt for different countries.”

Chapter 4: Stabilizing and Healing the Housing Market

Data needed: “A combined database [on mortgage debt and performance] could make available critical statistics on the health of the housing market. For example, it could establish a link between first- and second-lien mortgages on the same property, providing key information on the overall extent of borrowers’ leverage in different housing markets.”

Chapter 6: Jobs and Income: Today and Tomorrow

Data needed: “While there has been useful research on this topic, data limitations have hampered attempts of economists and other social scientists to measure the extent of international mobility.”

Chapter 7: Preserving and Modernizing the Safety Net

Data needed: “Current initiatives by Federal agencies and academic researchers are aimed at developing data systems that support disease-based estimates of health spending. Research in this area focusing on selected conditions has shown that disease-based measures allow for a more nuanced understanding of what drives the growth in health spending. The results suggest that failing to account for changes in the inputs used to treat a particular condition and for improvements in health outcomes leads to an overestimate of health care inflation and an underestimate of productivity gains in the health sector.”

“We’re seeing more and more so-called south-south investments, the emergence of regional players in terms of both trade and investment flows,” Thunell said in an interview. “It’s accelerating as a result of the crisis,” he said.

Deeper financial markets fuel growth and can protect against the damaging volatility associated with external economic shocks.

The IFC is a global development arm of the World Bank focusing exclusively on the private sector, providing equity, short and long-term financing and advice. With total assets of around $68 billion, it finances firms both directly and through banks, private equity funds and other vehicles.

The European sovereign debt crisis is forcing euro-area banks to bulk up their capital and concentrate often widely disbursed funding back into Europe to buffer against a worst-case scenario: a cascade of defaults, starting with Greece.

The Institute of International Finance expects capital flows to emerging markets to fall this year by an estimated $164 billion, contributing to a near-30% plummet in cash flows to those regions since 2010. Emerging market governments also don’t have the same budget room they did after the 2008 financial crisis to stimulate growth.

“The European banks, which have been very strong in cross-border finance, are reducing their exposures,” Thunell said. “There are lots of project finance portfolios for sale from the European banks and they are cutting down on peripheral finance. They are looking at their subsidiaries, asking if they are essential,” Thunell said.

That is particularly tough on companies that don’t have access to capital markets, such as the small-to-medium enterprises that dominate developing economies. Still, it is an opportunity for regional banks, the IFC chief executive officer said.

Thunell said he expects euro-zone leaders will “muddle through,” particularly since the European Central Bank has stepped up its efforts to contain the crisis. But, he warned, “there’s more downside to this scenario than upside,” particularly given the amount of political uncertainty in 2012. He points to the possible change in leadership in a number of major economies, including France and China.

“We can hope … but we have to prepared that things may not pan out as well,” he said.

Given the fall in euro bank funding, and since investments in manufacturing capacity tend to fall in down economic cycles, Thunell said the IFC is focusing instead on boosting working capital levels in emerging markets. The corporation is using its network of over 600 banks around the world to attract additional financing. That fosters the development of financial markets that have traditionally been too thin to manage strong growth without Western investment.

Besides ramping up trade finance, “we’re looking at helping to bring in risk capital, and continuing our equity investments,” Thunell said. In particular, the IFC is expanding its short-term loan portfolio, including rolling out new three-year financing options.

In the Middle East and North Africa Region, for example, the IFC expects to invest up to $6 billion over the next three to four years, assuming the political situation stabilizes in countries such as Egypt, Tunisia and Algeria. The IFC recently inked a deal to provide $35 million in loans for chemical factory in Egypt, a joint venture between Indian and Egyptian companies, with additional financing from a Jordanian bank.

Thunell said Eastern Europe is the most exposed to the euro crisis, followed by Latin America. Except for the Francophone states, he said Africa is more insulated while Asia is the least exposed, despite its trade, financial flows and commodity linkages. That is partly because regional firms are able to help step in the gap.

It’s the type of head-scratching the central bank’s carefully-crafted statements and minutes have long produced and continue to generate, despite the Fed’s recent push to communicate more clearly.

Economists parsing the “summary of economic projections” released Wednesday along with the minutes of the Fed’s Jan. 24-25 policy meeting puzzled over the descriptions of how many Fed officials were prepared to start buying more bonds this year to boost the recovery, compared with how many wanted to wait to see if the economy weakened before taking more action.

“A few participants’ assessments of appropriate monetary policy incorporated additional purchases…,” the minutes said, while “a number of participants indicated that they remained open to a consideration of additional asset purchases if the economic outlook deteriorated.”

Several Fed watchers thought “a few” translated into a smaller group of officials than “a number.”

“In Fedspeak, ‘a number’ is greater than ‘a few,’” said Dean Maki, chief U.S. economist at Barclays Capital, who previously worked as a researcher at the Fed. A “few” probably means in the range of three officials, while “a number” is more in the ballpark of five, he said. “There clearly was information being transmitted in those two different phrases,” he said: fewer Fed officials think another round of bond-buying would be needed soon.

While there’s no official manual, Maki said he would rank the Fed’s descriptions of group size as, in ascending order: “few,” “some,” “a number,” “many,” “most,” and finally, “all.”

Deciphering the Fed’s language is a skill acquired over time, he said. “I don’t think there are short cuts.”

Fed staff prepare the minutes in the days after the Federal Open Market Committee meets. The Fed officials who can vote on interest rate moves — the Board of Governors and five of the 12 regional bank presidents — later approve drafts of the minutes before they are released three weeks after the meeting.

Economists say every word issued by the Fed can help them understand how the central bank views the current state of the economy and how it might be plotting its next move.

“People want to squeeze out every last drop of nuance and meaning from the minutes,” said Michael Feroli, chief U.S. economist at J.P. Morgan Chase. While the Fed’s language can be tricky to translate, “if you follow it long enough, it becomes a second language,” he said.

Another source of mystery are the words “exceptionally low” in the Fed’s policy statement released after meetings. The central bank has been signaling since March 2009 that interest rates would stay at “exceptionally low” levels for a long time.

How low is exceptionally low? Economists are struggling to understand. In an August speech in Jackson Hole, Fed Chairman Ben Bernanke said it meant at “current low levels,” which are near zero. But some economists took comments he made in a January press conference to imply it could mean up to 1%. The minutes didn’t clarify the confusion.

Analysts also debate the degree of difference between the words “moderate” and “modest.” The Fed uses both to describe the pace of economic growth, but economists don’t always know which one reflects a cheerier outlook.

“All those adjectives,” sighed Philip Suttle, chief economist at the Institute of International Finance, the global association of financial institutions. “You can tell ‘slight’ versus ‘severe’ — there’s a nice difference there, but some of the stuff in the middle is harder to tease out.”

Maki felt confident he could draw a thin distinction. “I do think there’s a slight difference where ‘moderate’ is a bit stronger than ‘modest,’” he said.

Elsewhere, the Fed has opened new windows into its operations: Bernanke now holds press conferences four times a year and the central bank just started releasing Fed officials’ detailed interest-rate forecasts.

But the Fed’s vocabulary continues to carry an element of mystery.

Eswar Prasad, once the International Monetary Fund’s top China hand, still finds open doors at Beijing’s top economic agencies.

The slender 46-year-old economist, who holds posts at the Brookings Institution in Washington and Cornell University, is in Beijing and Shanghai to discuss a new report he and co-author Lei Ye wrote on the international role of China’s currency, the yuan (also known as the renminbi). At the same time, he’s holding meetings with officials from China’s central bank, banking regulatory commission and China Investment Corp., the country’s huge sovereign-wealth fund.

Mr. Prasad recently sat down for breakfast with the Wall Street Journal’s Bob Davis. Below is an edited transcript:

China’s economy slowed down substantially in the last quarter, leading to expectations that the central bank would sharply ease bank reserve requirements. That hasn’t happened thus far. Why not?

The one word that keeps coming up in meetings is stability. They are concerned about problems later on, (especially a collapse in demand from a recession-battered Europe). They want to keep their policy powder dry.

If they do act, I’d expect an aggressive policy response, which will depend more heavily on fiscal policy than was the case in 2009 and 2010. They know the last stimulus package depended too much on loans and they don’t want to exacerbate problems with banks this time.

Don’t Chinese leaders traditionally feel constrained from taking dramatic action during a political transition, such as the one occurring this year and next?

I understand that Premier Wen has conveyed to agency heads the message:  ”I have time left in my term. I don’t want reforms to stagnate.” Wen is trying to prod people to do things. But it’s difficult to see significant reforms in the next few months. He especially is trying to deal with housing so it doesn’t turn into a problem and mar his legacy.

[Note: Chinese media have reported that Mr. Wen has had a series of meetings recently where he has urged further reforms.]

Are the Chinese right to be worried about Europe?

The numbers on Greece just don’t add up. Their output is falling at 7% rate annually and (even with debt restructuring) they’ll wind up with a debt burden of 120% of GDP. It’s unclear how long European countries will continue their support for Greece or how much more pain the Greek population is willing to endure.

Greece is going through a lot of pain without resolving its competitiveness problems. Greece has potential, but it takes enormous political will to make reforms. That political will is now being used for austerity. By mutual agreement of Greece and European countries, I think Greece will eventually exit the Euro zone.

In any event, the turmoil in Europe is not good for China. It implies continued weakness in China’s largest export market, the European Union, and a strong dollar, which also means a strong renminbi. These factors are not good for China’s export prospects.

Your new report predicts that the renminbi will become a reserve currency within 10 years and included in the IMF’s Special Drawing Rights basket of currencies in five years. Did the officials you spoke to agree?

The background tone was that they aren’t in any particular rush to have the renminbi play a big role in global financial markets. On the SDR, I don’t see how the IMF can avoid including them in 2015 when it reviews the system. The Fund is already revising criteria (in a way that would make it easier for the renminbi to qualify). The U.S. wants to offer SDR membership to China like a prize and get something in return. But it’s not a bargain. China isn’t dying to see the renimbi in the SDR.

Do you expect the renminbi to appreciate against the dollar at something close to the 4.7% increase of 2011?

In the short terms it’s hard to make the case anymore that the renminbi is hugely undervalued given China’s falling trade and current account surplus and the minimal reserve accumulation in the latter half of 2011. But over the next two to three years it’s hard to imagine there won’t be pressure for renminbi to appreciate given the higher productivity growth in China relative to its trading partners.

This year, though, if the dollar strengthens significantly, we may see no renminbi appreciation despite the political pressure from the U.S. Chinese domestic political considerations will be the overriding issue.

Do you think China will support an emerging market candidate for World Bank president?

The betting in Beijing is that a U.S. candidate will win because it may be difficult for emerging markets to agree on a candidate. The Chinese feel that their time is coming soon. So they may hold off this time in supporting an emerging market candidate. That would create more of a sense of obligation to pick a World Bank president from an emerging market next time.

First, economists expected a bigger advance. After all, the mild weather should have allowed builders to break ground on many more projects than in a typical January. Economists at IHS Global Insight warn the building activity pulled forward into the tepid winter months could mean a payback in starts come the spring.

Second, the mix of projects suggests demand for new homes is coming from renters, not buyers. All the increase was in multifamily buildings. Single-family housing starts actually fell 1.0% last month.

For the last few years, housing’s problem has been insufficient demand to clear out the overhang of supply. For whatever reason–lack of downpayment, financing problems, the inability to sell a currently owned house–buyers are still largely missing from the housing equation.

That’s evident in consumers’ plans and mortgage activity.

According to Conference Board data, the percentage of consumers planning to buy a home has increased over the past year. But the share of possible buyers remains low and any improvement has come in plans to buy an existing home, not a new house.

In addition, mortgage applications to purchase a home dropped sharply in the latest week and now stand below their year ago levels–despite the bargain-basement mortgage rates.

For their part, builders are banking on sales to increase into the summer.

The Housing Market Index compiled by the National Association of Home Builders and Wells Fargo has increased for five months in a row. A growing share of builders expect sales to pick up over the next six months [although it should be noted that the expected sales index remains far below the readings during the boom years.]

The better expectations are probably based partly on the improvement in the labor markets. Faster job growth will supply more income and confidence to potential buyers.

To that end, builders should welcome the latest drop in new jobless claims. Filings fell 13,000, to 348,000 for the week of Feb. 11. Claims have not been below 350,000 since March 2008.

If those expected homebuyers don’t materialize, however, home builders will have to rethink their construction plans heading into 2012′s second half.

“This has to be a temporary tax cut. I don’t see any reason to consider supporting its extension” in 2013, Geithner said at a Senate Budget Committee hearing.

A tentative deal outlined earlier this week among lawmakers would extend the tax break, which reduces workers’ payroll taxes to 4.2% from 6.2%, until the end of this year.

Geithner said he supports the extension through the end of 2012, saying lawmakers had taken a “critically important” step toward helping the economy when they struck a deal to extend jobless benefits and a payroll-tax cut, and urged Congress to approve additional measures to bolster the recovery.

“Let’s try to build on this bipartisan moment of cooperation on something good for growth and move beyond that to do things that will help get construction workers back to work with investments in infrastructure, help Americans refinance their homes, and strengthen the incentives we create for companies to invest here in the United States,” Geithner said at a Senate Budget Committee hearing.

Congressional negotiators working to extend jobless benefits and a payroll-tax cut earlier said they have come to a deal, paving the way for a vote before the policies expire at the end of the month.

The Philadelphia Fed said its index of general business activity within the factory sector rose to 10.2 in February from 7.3 in January.

Economists surveyed by Dow Jones Newswires expected the latest index to rise to 10.0. Readings under zero denote contraction, and above-zero readings denote expansion.

Within the Philly Fed survey, the subindexes were mostly higher this month. The new orders index rose to 11.7 from 6.9 last month while the shipments index jumped to 15.0 from 5.7.

The labor picture, however, was mixed. The important hiring index slowed sharply to 1.1 from 11.6 in January, but the workweek index increased to 10.1 from 5.0.

Price pressures increased this month. The prices-paid index in February increased to 38.7 from 31.8 in January, while the prices-received index rose to 15.0 from 11.2 last month.

On Wednesday, the New York Fed reported that manufacturers in New York state were also seeing business activity expanding this month. Nationwide, the factory sector has been one of the best performers in the economy.

Philadelphia manufacturers remain optimistic about the future although the index gave up some ground from January. The Philly expectations index for business conditions over the next six months fell to 33.3 from 49.0 in January, which had been the highest reading in 10 months.

In a series of special questions, the Fed asked manufacturers about capital spending plans. Nearly 36% expect to increase capital spending this year.

“Firms that plan to increase capital spending noted that they expect to spend more on noncomputer equipment, software, and computer hardware, and they most frequently cited expected high sales growth, the need for replacement capital, and an improved cash flow or balance sheet position as the reasons for their increased capital spending plans,” the report said.

–Roubini’s Caveats: Nouriel Roubini notes a stronger outlook but highlights four downside risks. “First, the eurozone is in deep recession, especially in the periphery, but now also in the core economies, as the latest data show an output contraction in Germany and France… Second, there is now evidence of weakening performance in China and the rest of Asia… Third, while US data have been surprisingly encouraging, America’s growth momentum appears to be peaking. Fiscal tightening will escalate in 2012 and 2013, contributing to a slowdown, as will the expiration of tax benefits that boosted capital spending in 2011… Finally, geopolitical risks in the Middle East are rising, owing to the possibility of an Israeli military response to Iran’s nuclear ambitions.”

–Mortgage Fix: Alan Boyce, Glen Hubbard and Chris Mayer says a fix for housing must focus on Fannie Mae and Freddie Mac. “Immediate reforms are necessary to make sure the GSEs live up to their mandates and to achieve the crucial goals of phasing out the GSEs and returning private capital and competition to the housing finance system. FHFA should appoint an independent trustee to wind down existing GSE mortgage-backed securities holdings, consistent with public conservatorship. Managing the mortgage portfolio while controlling lending standards is inconsistent with the GSEs’ mandate to ensure a “stable, efficient and liquid mortgage market.” Removing the portfolio from GSE control will also simplify winding down the GSEs. Next, it is time to streamline refinancing for all borrowers with GSE-guaranteed mortgages. Taxpayers already hold the default risk on these mortgages, and interest rate reduction would cut this exposure. Responsible borrowers should be the first in line. GSEs should use a simple standard to determine eligibility to refinance; for example, if a homeowner is current for three months. They should not impose income checks, loan-to-value requirements or new appraisals. They should work with existing parties to resolve issues with second liens and mortgage insurance.”

–Budget Chart: The Bipartisan Policy Center posts an interesting chart that shows the difference between the deficit under current law and likely policy. “Unlike current law, the Bipartisan Policy Center’s Plausible Baseline assumes that the 2001, 2003, and 2010 tax cuts are extended, the AMT is indexed to inflation, Medicare’s physician payment rates are maintained at their current rate (the “doc fix”), the looming sequester from the Budget Control Act of 2011 is lifted, and troops stationed overseas decline to 45,000 by 2015″

Compiled by Phil Izzo

Steep but likely temporary declines in utility use and mining activity held industrial production unchanged in January. Unseasonably warm weather caused less demand on utilities, and the drop in mining was the first in almost a year.

Manufacturing output alone–74% of all industrial production–increased 0.7% last month. Auto makers led the gain, with vehicle output jumping 6.8% after a 3.8% increase in December.

The Federal Reserve also revised total December industrial output much higher, to show an increase of 1.0% rather than 0.4% reported earlier. [That refiguring makes a nice counterpoint to Tuesday's downward revisions to December retail sales. Perhaps instead of shopping, more factory workers were at their jobs.]

Economists at Nomura Securities said that according to one Fed economist “roughly 0.45 percentage points reflected new data received on vehicle assemblies and a number of other industries that had previously been estimated due to a low response rate. In addition, upwardly revised data from the Bureau of Labor Statistics on production worker hours accounted for another 0.15 [percentage point] of December’s upward revision.”

U.S. manufacturing struggled last year with supply disruptions overseas–the disasters in Japan and flooding in Thailand. The latest numbers suggest those obstacles are behind the sector.

Moreover, the first piece of February data show continued expansion. The New York Fed said the state factory sector is expanding this month, although a slowdown in the growth of new demand bears watching.

Politicians are heralding the factory rebound as necessary for the economy. And certainly increased output from any sector is welcome to the outlook.

The production gains, however, are not the salvation for the American workforce.

That’s because the increases have not been matched by an equal strength in hiring or overall labor input. The average workweek for a factory production worker, at 41.9 hours, is at its longest since January 1998 but that likely reflects the mild weather as much as production schedules.

Since bottoming out in June 2009, manufacturing output, as measured by the Fed, has increased nearly 18%. Aggregate hours worked–which counts production jobs and average worktime–has risen less than 8%. Productivity growth has accounted for the bulk of the output rise.

At last month’s meeting the committee produced a Statement on Longer-Run Goals and Monetary Policy Strategy that included an explicit long-run inflation target of 2% and sought to clarify the central bank’s stance. But according to the meeting minutes, released Wednesday, not all of the FOMC participants voted to back the statement.

Governor Daniel Tarullo abstained from the vote “because he questioned the ultimate usefulness of the statement in promoting better communication of the Committee’s policy strategy.”

The Fed has been driving headlong into greater transparency under Chairman Ben Bernanke, but it’s clear that some members think they may be moving too fast.

The full text of the statement of principles follows:

Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments as appropriate at its annual organizational meeting each January.

The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.

Inflation, employment, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Moreover, monetary policy actions tend to influence economic activity and prices with a lag. Therefore, the Committee’s policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee’s goals.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee’s ability to promote maximum employment in the face of significant economic disturbances.

The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee’s policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information about Committee participants’ estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMC’s Summary of Economic Projections. For example, in the most recent projections, FOMC participants’ estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than the corresponding interval several years earlier.

In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee’s assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.

In the meantime, the CFPB funds itself through a bank account at the New York Fed.

Under the Dodd-Frank law, the CFPB gets its money from transfers from the Federal Reserve System, up to specific caps set by the law. The Fed can’t turn down requests under that cap.

The caps are fixed percentages of the Fed’s operating expenses, which works out to the following:

–10% of Fed operating expenses in fiscal 2011 or $498 million –11% of Fed operating expenses in fiscal 2012 or $547.8 million –12% in fiscal 2013 or $597.6 million –12% each fiscal year thereafter, subject to annual adjustments for inflation

If the CFPB thinks it needs more money it can ask for an extra $200 million through fiscal 2014, but the CFPB says it won’t.

In the fiscal year that ended in September 2011, the first full year of the Bureau’s existence, the CFPB only used $123 million. The bureau estimates it will spend $356 million in the current fiscal year (2012). Here is their budget justification for fiscal year 2013 — where they plan to spend $448 million.

A series of letters from the Fed notifying the CFPB that their requests have been met show that the funds get deposited in the “Bureau of Consumer Financial Protection Fund” at the New York Fed. (See a request letter and the Fed’s response.)

The Fed has carried out seven transfers since the president signed Dodd-Frank into law. The first transfer happened Aug. 12, 2010 — one day after it was requested by Treasury Secretary Timothy Geithner on behalf of the nascent bureau — in the amount of $18.4 million. The next request for $14.4 million was approved the same day.

Now that’s service.

Dallas Federal Reserve President Richard Fisher on Wednesday described the potential for a new round of stimulus from the central bank a “Wall Street fantasy,” adding the chances of it happening are almost nil.

There won’t be a new round of Fed stimulus “unless there is some extreme crisis that none of us can presently foresee,” he said, speaking to reporters after a speech to a manufacturing group here.

“In my view, it’s not going to happen,” he said. “It’s a fantasy. Wall Street keeps dangling QE3 out there [but] I just don’t see it happening.”

Fisher, a critic of the Fed’s previous stimulus effort, known as QE2, said economic data has been on the upswing, albeit at a slow pace.

He also noted that the Fed received significant political “blowback” on Capitol Hill after its previous stimulus effort but has since built back some goodwill. He said the Fed is unlikely to risk jeopardizing that “unless it were glaringly necessary.”

Fisher currently doesn’t hold a voting slot on the Federal Open Market Committee.

On the economy, he said continued signs of progress have been evident even in the last few weeks.

“We’re not slipping backward,” he said. “We’re moving forward [although] the question is the pace.”

Recent data out of Europe hasn’t been as bad as feared, he noted, and “the Greek situation … doesn’t seem to be as frightening as it was in terms of contamination and cross-fertilization.”

Meanwhile, Fisher reiterated his view that the five largest U.S. banks should be broken up, saying he’s skeptical the Dodd-Frank act can alleviate the problem of banks deemed “too big to fail.”

Fisher called the Dodd-Frank act “well intended” but said he doesn’t think it’s a remedy “to treat too-big-to-fail,” meaning banks so big that their failure could cause widespread economic calamity.

He also voiced strong support for the Volcker Rule, which would ban big banks from trading with their own money. The rule has come under assault from many Wall Street trading groups and banks trying to soften it.

“I fully support the Volcker Rule,” Fisher said, noting that the rule’s namesake, Paul A. Volcker, former Federal Reserve chairman, is a close friend of his.

“There is an enormous lobby right now that is hammering against him, and I think he’s right, and I don’t buy the counter arguments,” Fisher said.

–Unemployment Extension: Amid reports that Congress is nearing an extension of unemployment benefits, Chad Stone looks at where benefits stand now and how they would change without an extension. “Besides the obvious benefit of supporting unemployed workers and their families at a time when there is still only one job opening for every four unemployed workers, UI is one of the most cost-effective ways to support the economic recovery. CBO ranked it first in its bang-for-the-buck effectiveness among the measures it examined. Mark Zandi, Chief Economist of Moody’s Economy.com, estimates that failure to continue emergency UI benefits could reduce GDP by 0.3 percentage points this year and cost hundreds of thousands of jobs.”

–Euro Zone Crisis: Martin Wolf examines the structure of the euro zone. “The eurozone is in a form of limbo: it is neither so deeply integrated that break-up is inconceivable, nor so lightly integrated that break-up is tolerable. Indeed, the most powerful guarantee of its survival is the costs of breaking it up. Maybe that will prove sufficient. Yet if the eurozone is to be more than a grim marriage sustained by the frightening costs of dividing up assets and liabilities, it has to be built on something vastly more positive than that. Given the economic divergences and political frictions revealed so starkly by this crisis, is that now possible? That is the most difficult question of all.”

–Oil Prices and Spending: Ed Yardeni looks at the effect of rising oil prices on consumer spending. “Retail sales of gasoline service stations did climb by 1.4% during January to $539.4 billion (saar), but they’ve been around that level for the past year. They currently account for 11% of retail sales. Americans have been responding to high gasoline prices by driving less. The Federal Highway Administration reports that vehicle miles traveled in the US fell to 2.96 trillion in the 12 months through November, the lowest since May 2009. This series actually peaked at a record 3.04 trillion miles back during November 2007. The 52-week average of gasoline usage fell in early February and the lowest since February 2004. While consumers are driving less, they continue to shop. Retail sales rose to a fresh record high in January. The 0.4% m/m increase was weaker than expected, but matched consensus expectations of a 0.7% increase excluding autos, which declined 1.1%. That didn’t jibe with the unit auto sales data showing a 4.6% increase during the month.”

Compiled by Phil Izzo