January 17, 2020 / 2:26 PM / a month ago

U.S. manufacturing output rises unexpectedly

WASHINGTON, (Reuters) - 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.

FILE PHOTO: An assembly line worker works on the production line at Renegade RV manufacturing plant in Bristol, Indiana, U.S., April 16, 2019. REUTERS/Tim Aeppel

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.

Reporting by Howard Schneider; Editing by Andrea Ricci

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