Manufacturing Production in U.S. Increases by Most Since July

  • Consumer-goods output posts biggest advance in six months
  • Colder weather propels utility output by most since 2009

U.S. manufacturing output rose in January by the most since July 2015, a sign the industry was starting to stabilize at the beginning of the year.

The 0.5 percent advance at factories, which make up 75 percent of all production, followed a 0.2 percent decrease the prior month, a Federal Reserve report showed Wednesday. Total output, which also includes mines and utilities, jumped a larger-than-projected 0.9 percent.

Factory production was boosted by the biggest gain in the output of consumer goods since July on increases in both durables and nondurables. The improvement indicates the worst of the drag from a stronger dollar, malaise in overseas markets and less spending in the energy sector may be starting to diminish.

“It looks like we’re getting some stabilization,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. “The commodity-related headwinds to manufacturing are seemingly dissipating.”

The median forecast in a Bloomberg survey of economists called for a 0.2 percent rise in manufacturing output. The previous month’s reading was revised from a 0.1 percent drop.

For total industrial production, the Bloomberg survey median called for a 0.4 percent rise. The prior month was revised to a 0.7 percent decrease from a previously reported 0.4 percent decrease. The January increase was the biggest since November 2014.

Colder Weather

Utility output surged 5.4 percent, the most since December 2009, after a 2.9 percent drop the previous month, the Fed report showed. Production rebounded as more seasonable weather revived demand for home heating following the warmest December on record.

Mining production, which includes oil drilling, was unchanged following four straight declines. Weaker prices for oil and other commodities is weighing on mining, economists predict. Rig counts are still falling, reflected in depressed drilling activity. The Fed’s report showed drilling dropped 5.9 percent last month.

Capacity utilization, which measures the amount of a plant that is in use, rose to 77.1 percent from 76.4 percent in the prior month. Capacity at factories climbed to 76.1 percent, the first increase in three months.

Factory output of consumer goods climbed 1.6 percent after falling four consecutive months. The output of motor vehicles and parts increased 2.8 percent. Excluding autos and parts, manufacturing rose 0.3 percent after no change.

Vehicle demand continues to be a mainstay for factories. Purchases of cars and light trucks rose to a 17.5 million annualized rate in January, from 17.2 million a month earlier, according to Ward’s Automotive Group.

Machinery production rose 0.7 percent, the Fed report showed. Output of all business equipment increased 0.3 percent, the first gain in five months.

Recent reports showed factory payrolls rose in January by the most in more than a year, and hours worked climbed.

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