Manufacturing Expansion Slows Down, Industrial Production Dips in December, Says Fed

US manufacturing output rose 0.3% in December, but warm weather that blanketed the entire country reduced heating demand, significantly dragging down utilities output and the nation's overall industrial production for the month.

The 0.1% decline in December was the first contraction in the nation's total industrial output since August, the Federal Reserve announced Friday, and the country finished the fourth quarter with an annualized industrial expansion rate of 5.6%. Manufacturing, which accounts for three-quarters of the country's industrial output, expanded 5.2% in the fourth quarter.

Utilities plummeted 7.3% last month, and mining, the third major sector of industrial production, jumped 2.2%. The slight decline in the nation's overall output still was 4.9% above its level in December 2013. Economists had forecast industrial production to remain for the month.

Manufacturing output in December was 4.9% higher than the same month a year earlier, led by the production of primary metals and computers and electronic products. But the sector's 0.3% expansion was a sharp fall from the 1.3% spike in November, which the Fed revised upwardly from a previous estimate of 1.1%. Durable goods production rose 0.2%, while nondurables gained 0.4%.

Output in consumer goods plunged 1.1%, as automotive production saw a 0.6% decline compared with a 5.6% jump in November. Factory production of home electronics fell 0.3%, following a 2.5% gain the previous month. Output in appliances and furniture rebounded from a 0.5% November decline with a 1.3% expansion.

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Industrial equipment production in December was flat, according to the Fed data. Factories producing machinery dropped 0.2% after a torrid October (3.1%) and robust November (1.7%). Aerospace and transportation equipment fell 0.3%. However, defense and space equipment rose 0.4%.

In nondurables, output of plastics and rubber products declined 0.8%, after rising 2.4% in November. This counteracted a 0.4% expansion in chemicals production and a 0.9% increase in petroleum and coal products.

Much of the strength in the 2.2% expansion in mining output came from increases in oil and gas extraction despite a 1.9% drop in drilling and well-servicing activity at oil and gas fields. Oil and gas drilling has contracted for three consecutive months since September, after rising steadily through last spring and summer, reflecting rising supplies and the resultant crash in crude oil prices.

Manufacturing capacity utilization went unchanged in December at 78.4%, still 0.3% below its long-run average. Still, the slack in factory resources was 2.1% narrower compared with December 2013. Capacity utilization in durables manufacturing ticked down 0.1% and was offset by a 0.2% increase in nondurables.

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Will Ng is a perfectionist who has been in business journalism for more than 15 years, many of which have been devoted to covering manufacturing, technology, and industry. A writer first, he loves to tell a good story and enjoys reporting on market trends and news.