US manufacturing output rises unexpectedly

U.S. manufacturing output rose unexpectedly in December as a drop in motor vehicle output was outpaced by increases in production of other durable goods, food and beverages, and other products.

The Federal Reserve said on Friday that manufacturing production rose 0.2% last month after a downwardly revised 1.0% increase in November. Overall industrial output fell 0.3% in December after a downwardly revised increase of 0.8% in November.

The drop in overall industrial output was driven by a 5.6% decline among utilities, as demand for heating fell during an unseasonably warm December.

Excluding motor vehicles and parts, industrial production in December was unchanged, and manufacturing rose 0.5%.

Economists polled by Reuters had forecast both overall industrial output and manufacturing output would fall 0.2% in December. On an annualized basis production at factories fell 1.3% from December 2018 to December 2019.

The Fed’s measure of the industrial sector comprises manufacturing, mining, and electric and gas utilities.

There was a 4.6% fall in the production of motor vehicles and parts in December. Manufacturing output of food, beverage and tobacco products rose 1.3%, nonmetallic mineral products rose 2.3%, primary metals output rose 1.3%, and computer and electronics products rose 1.4%.

The manufacturing sector, which makes up about 11% of the U.S. economy, has been weakened by a 18-month-long trade war between the United States and China. The two countries signed a preliminary trade deal on Wednesday.

With overall industrial output falling, capacity utilization, a measure of how fully firms are using their resources, fell 0.4 percentage point to 77% in December from an upwardly revised 77.4% in November.

However, that was influenced by the decline in utilities output. Utilization at factories nudged higher, to 75.2% compared to 75.1% in November.