Production at U.S. factories unexpectedly fell in January, weighed down by harsh winter weather.
Manufacturing output dropped 0.5% last month after an unrevised 0.1% gain the prior month, the Federal Reserve said on Thursday. The Fed attributed the decline to "winter weather."
Economists polled by Reuters had forecast factory output would be unchanged. Production at factories fell 0.9% on a year-on-year basis in January.
Manufacturing, which accounts for 10.3% of the economy, could be on the verge of recovery after treading water for much of 2023 following 525 basis points worth of interest rate hikes from the U.S. central bank since March 2022. A survey from the Institute for Supply Management early this month showed its manufacturing PMI contracting slightly in January.
Motor vehicle and parts output slipped 0.2% last month after increasing 3.2% in December. Durable goods manufacturing production edged up 0.1%. There were large increases in the production of electrical equipment, appliances and components as well as aerospace and miscellaneous transportation equipment.
Output of computer and electronic products also rose, lifted by semiconductor production. But output of nonmetallic mineral products and primary metals fell.
Production of nondurable goods dropped 1.1%. There were significant weather-related declines in the output of petroleum and coal, chemicals, plastics and rubber products.
Mining output fell 2.3% as harsh weather weighed on oil and gas extraction as well as coal production. Mining production increased 0.9% in December. Utilities production rebounded 6.0% as freezing temperatures boosted demand for heating. That followed a 1.7% drop in December.
Overall industrial production dipped 0.1% in January after being unchanged in December. Industrial production was unchanged year-on-year in January.
Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, fell 0.2 percentage point last month to 78.5%. It is 1.1 percentage points below its 1972-2023 average. The operating rate for the manufacturing sector declined to 76.6% from 77.1% in December. It is 1.6 percentage points below its long-run average.
