Industrial output rises in December but utilities slump

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Industrial output rose in December and motor vehicle assembly picked up, suggesting the manufacturing sector continues to expand at a moderate pace.

 Photo: Rebecca Cook / Reuters
Ford Assembly workers install a battery onto the chassis of a Ford Focus Electric vehicle at the Michigan Assembly Plant in Wayne, Michigan November 7, 2012.
Photo: Rebecca Cook / Reuters

Industrial production increased 0.3 percent last month after a 1.0 percent increase in November, the Federal Reserve said on Wednesday. The gain was in line with economists' expectations.

Manufacturing production increased 0.8 percent in December after advancing 1.3 percent the prior month. Automobile assembly increased from November's pace.

For the fourth quarter, industrial production rose at a 1.0 percent annual pace. Manufacturing output increased at a tepid 0.2 percent pace during the October-December period.

Factory activity has cooled in recent months and the industrial production report supported views that the sector, which carried the economy's recovery from the 2007-09 recession, was not heading for a hard landing.

Last month, mining production gained 0.6 percent after rising 0.3 percent in November. Utilities output slumped 4.8 percent as unseasonably warm weather held down demand for heating.

Last month, the amount of industrial capacity in use edged up to 78.8 percent from 78.7 percent in November.

Industrial capacity utilization - a measure of how fully firms are using their resources - was 1.5 percentage points below its long-run average.

Officials at the Fed tend to look at utilization measures as a signal of how much "slack" remains in the economy, and how much room growth has to run before it becomes inflationary.

(Reporting by Lucia Mutikani; Editing by James Dalgleish)

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