Factory Production Posts Tepid Growth in January
Factory production rose less than forecast in January as motor vehicle assemblies declined along with demand for construction materials, indicating U.S. manufacturing is moderating.
The 0.2% increase in output followed no change in December that initially was reported as a gain, data from the Federal Reserve showed Feb. 18.
The median estimate in a Bloomberg News survey of economists called for a 0.4% advance. Total industrial production, which includes mining and utilities, also rose 0.2%.
U.S. factories are tempering production as flagging global growth prompts overseas customers to pare orders. At the same time, persistent employment gains and cheaper energy costs will help underpin domestic demand and keep manufacturing from faltering.
“Output from U.S. factories continues to expand at a moderate pace,” Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh, wrote in an e-mail to clients. “Consumers are buying more thanks to job and income gains. A major drag in manufacturing in the near term is global demand.”
Among other reports, new residential construction fell in January as builders broke ground on fewer single-family homes. Housing starts decreased 2% to a 1.07 million annual rate, after the prior month’s 1.09 million, according to Commerce Department data.
The producer-price index decreased 0.8% in January after a 0.2% decline the prior month, according to a separate report from the Labor Department.
Manufacturing output, which accounts for about 12% of the economy, previously was reported as rising 0.3% in December. Total industrial production was forecast to increase 0.3% in January.
Capacity utilization, which measures the amount of a plant that is in use, was unchanged at 79.4% last month.
Utility output climbed 2.3% after a 6.9% drop in December.
Mining production, including oil drilling, decreased 1% in January after a 2.1% advance in December. Drilling and servicing at wells slumped 10%, the fourth straight decline and the biggest decrease since March 2009.
After several months of falling energy costs, oil companies, including Houston-based Apache Corp., are paring production. The “dramatic and almost unprecedented” price plunge prompted the company to cut operating rigs by 70% by the end of this month, CEO John J. Christmann said on an earnings call last week.
Consumer-goods output rose 0.2% in January after a 0.8% decrease. Factory production of motor vehicles and parts fell 0.6% after a 1.3% decline. Auto assemblies slowed to an 11.76 million annualized rate after 11.93 million a month earlier, the Fed said.
Excluding autos and parts, manufacturing output rose 0.2% after rising 0.1% the prior month.
Sales of cars and light trucks eased to a 16.6 million annualized rate in January after 16.8 million in December, according to figures from Ward’s Automotive Group. Last month still was stronger than the 16.4 million monthly average in 2014.
Production of construction supplies decreased 0.3% in January after a 1% surge.
Business-equipment production rose 0.8% after a 1.2% decrease, the Fed’s report showed.
The Institute for Supply Management’s manufacturing index showed similar results in January. The gauge declined to a one-year low of 53.5 from December’s 55.1, according to the Tempe, Arizona-based group. Readings greater than 50 signal growth.
