A question on the US recovery

The headline looks like cheerful on the news that the index of industrial production in the US rose 0.4% in November from the previous month, a four-month high since July. Moreover, you might want to jump for joy to hear that both of overall and core consumer price index climbed 0.1% in November from the previous month, still subdued in a historical standard. Hence, Bloomberg reports:

Industrial production in the U.S. increased more than forecast in November and consumer prices slowed, indicating the recovery is gaining momentum without generating inflation.

Output at factories, mines and utilities rose 0.4 percent, the biggest gain since July, after a revised 0.2 percent drop in October, a Federal Reserve report showed today in Washington. The consumer-price index climbed 0.1 percent in November after a 0.2 percent gain the prior month, the Labor Department said.

Assembly lines are speeding up as business investment and exports grow and consumer spending accelerates, helping to buoy an expansion that Fed policy makers said yesterday isn't strong enough to reduce a jobless rate hovering near 10 percent. Price increases that are below central bankers' goal will boost the case to maintain the Fed's purchases of $600 billion in securities through June to spur growth.

"The manufacturing sector continues to heal itself," said John Herrmann, a senior fixed-income strategist at State Street Global Markets in Boston. "The outlook for business spending on equipment and software remains very positive." Fed Chairman Ben S. Bernanke "is unlikely to withdraw accommodation until he sees a clear upward turning point in core inflation and a downward turn in unemployment."

What should be noted here is, however, that the index of industrial production sank from the previous year for the fifth straight month, the first time since the late 2008 to the early 2009. It doesn't necessarily mean that the economy is falling back into recession at least for now, but the downward trend is not supposed to "indicate the recovery is gaining momentum" right away given that the US economy still remains too fragile that it's far from on the path to a full-fledged recovery.

Let's look at consumption, which claims the biggest part of GDP. Real average hourly earnings for all employees have trapped in the range of $10.38 to $10.4 for seven months. While core retail sales, retail sales excluding volatile products like motor vehicle and parts, increased 1.2% in November, a eight-month high since March, household consumption is not likely to leap dramatically in the coming months if a lackluster growth of income continues.

Furthermore, another concern is arising in bond markets, where the yield of 10-year US Treasury notes reached 3.55% yesterday, a seven-month high since May. What's important here is that the rise in the bond yield is mostly derived from the rise in the real yield, which equals to the nominal interest rate minus the expected inflation rate. The rise in the real yield is considered to worsen the load of corporate debt, hence hindering investment. Private investment hasn't contributed much to the US economy, especially compared to household consumption which has the largest share of GDP. But given that consumption is expected to grow at best modestly due to still high unemployment and devastated housing markets, a lack of help from any source would suck a vigor of, if any, economic recovery.