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US Industrial Production Falls at the Steepest Pace Since May 2009

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US Industrial Production Falls at the Steepest Pace Since May 2009

Industrial output in the world’s largest economy unexpectedly declined in January, as severe weather weakened production in some parts of the country.

Industrial production declined 0.3 percent in January, official data from the Federal Reserved showed today in Washington. The decline, which is the steepest since May 2009, followed a revised gain of 0.3 percent in December. Economists forecast a similar gain of 0.3 percent in January.

After rising 0.3 percent in December, manufacturing output declined 0.8 percent last month, official data showed. Mining output declined 0.9 percent after rising 1.8 percent in December. Meanwhile, utilities rose 4.1 percent, as demand for heating was boosted by colder than normal temperatures.

Compared to year-ago levels, total output was 2.9 percent higher in January. Manufacturing rose 1.3 percent annually, while mining increased 6.7 percent over the previous 12 month period. The utilities industry experienced the sharpest year-on-year gain, rising 9.3 percent.

Industrial capacity utilization, which is used to gauge how fully companies are using their factory resources, declined 0.4 percentage points to 78.5. Capacity utilization was 1.6 percentage points below its long-run average, which covers the period 1972-2013.

The latest factory data follow a string of disappointing releases pointing to an unexpected slowdown in economic activity during the past two months. The abrupt slowdown has been partly attributed to severe weather, which gripped the continental United States in December and January. Severe weather has been partly to blame for weak durable goods orders, retail sales, home sales and jobs growth.

The weather-induced slowdown is likely to factor into economists’ calculation of first quarter GDP. The US economy, which expanded 3.2 percent annually in the fourth quarter, could face a broad cool down in the first three months of 2014.

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