US factory production declines in Jan for first time in three months

By Mark Niquette

US factory production decreased in January for the first time in three months, reflecting declines in the output of motor vehicles, machinery and metals.
 

The 0.5% decrease in manufacturing output followed a 0.1% gain a month earlier, Federal Reserve data showed Thursday. Total industrial production, which includes mines and utilities, fell 0.1% in January as severe winter weather caused pullback in mining activity.

Production of motor vehicles and parts slipped 0.2% after rebounding strongly in the prior two months after the United Auto Workers’ strike ended in October.

Excluding autos, manufacturing decreased 0.6% from December, the most since March. It also marked the fourth-straight monthly decline.

Recent surveys, however, suggest the worst of the malaise is drawing to an end. The Institute for Supply Management’s factory index climbed to a 15-month high in January as the largest share of purchasing managers since April reported higher orders.

Separate regional surveys on Thursday showed a slower pace of contraction in New York state manufacturing in February and the first expansion in Philadelphia-area factory activity in six months.

Still-high borrowing costs and sluggish export markets risk thwarting a sustained improvement in manufacturing.

The Fed’s report showed declines in US factory output of business equipment, materials and construction supplies, while production of consumer goods increased for a third month.

The Fed’s report also showed a jump in utility output as cold temperatures during the month boosted demand for heating. Mining decreased by the most in nearly three years, also partly due to winter weather that caused a pullback in oil and gas extraction.

Capacity utilization at factories, a measure of potential output being used, decreased to 76.6%, the lowest since April 2021. The overall industrial utilization rate eased to 78.5%.