US manufacturing output declines in January for first time in three months

US factory production declined in January, marking the first decrease in three months, with drops seen in motor vehicles, machinery, and metals output. The Federal Reserve attributed this decline to “winter weather,” noting a 0.5% drop in manufacturing output compared to a 0.1% gain in the previous month.

Economists surveyed by Reuters had anticipated no change in factory output. On a year-on-year basis, production at factories fell by 0.9% in January. Manufacturing, representing 10.3% of the economy, maybe on the cusp of recovery after a stagnant period in 2023, following significant interest rate hikes by the US central bank since March 2022. A recent survey by the Institute for Supply Management indicated a slight contraction in manufacturing PMI 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 the 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 points 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.

With inputs from Reuters.