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US Industrial Production Rises Less than Forecast in January

H.S. Borji
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US industrial production rebounded in January, as gains in manufacturing and mining outweighs a sharp drop in mining activities, a sign factory output was contributing positively to economic growth at the start of the year.

Total industrial production rose 0.2 percent in January, following a 0.3 percent drop the previous month, the Board of Governors of the Federal Reserve System reported today in Washington. The median estimate of economists called for a gain of 0.3 percent in January. November’s gains were revised down to 1.1 percent from 1.3 percent, official data showed.

Compared to January 2014, industrial production was up 4.8 percent.

Manufacturing production, which represents approximately 12 percent of the US economy and three-quarters of total production, advanced 0.2 percent, following no change the previous month. Year-on-year, manufacturing output was up 5.6 percent.

Manufacturing activity cooled again in January, as new orders and output continued to moderate. The Institute for Supply Management’s gauge of US manufacturing activity slipped to 53.5 from 55.5, as 14 of 18 manufacturing industries reported growth.

Output in the mining sector, which includes oil drilling, decreased 1 percent in January after posting a 2.1 percent increase the month before. Compared to year ago levels, mining production was up 8.5 percent.

Utilities output rose 2.3 percent last month, as frigid temperatures swept much of the country. Compared to January 2013, utilities output was down 6.6 percent, official data showed.

Among the major market groups, the production of consumer goods rose 0.2 percent. Year-on-year, consumer goods production increased 2.9 percent.

Industrial capacity utilization, which measures how fully US companies are using their factory resources, eased to 79.4 percent from 79.7 percent in January. That was 0.7 percentage points below the long-run average (1972-2014) and below forecasts calling for a gain to 79.9 percent.

Today’s figures suggest industrial production was supporting economic growth at the start of the year after its total contribution to GDP slowed in the fourth quarter. The published rates of change in output from September through December were all revised downward, the Federal Reserve’s statistical bullet confirmed today.

Last week the Commerce Department reported a smaller than expected rise in business inventories, prompting economists to downgrade their estimates of fourth quarter GDP growth. Initial estimates released in January showed the US economy expanded 2.6 percent annually in the fourth quarter. The government will release a revised estimate next week.

In a separate report today the Labor Department reported a record drop in producer inflation stemming from tumbling energy prices. The producer price index, a gauge of inflationary pressures in primary markets, declined 0.8 percent in January, the biggest drop since the series was restarted in November 2009. That followed a 0.3 percent drop the previous month. Economists forecast PPI to decline 0.4 percent. Compared to January 2013, producer prices were unchanged after rising 1.1 percent in December.

Tame inflation could complicate the Federal Reserve’s timetable for a rate increase. The Federal Open Market Committee said last month it was prepared to be patient in beginning to adjust interest rates, although did acknowledge that weak inflation was likely transitory.

The minutes of the January FOMC policy meetings will be released later today.

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