U.S. Industrial Production Falls Unexpectedly

Manufacturing production fell 0.7% in January.

After rising in December, January's U.S. industrial production fell 0.5%, the Federal Reserve said Feb. 15. Most economists had been expecting January production to remain unchanged, so the drop in output caught Wall Street by surprise.

The report showed manufacturing production fell 0.7% in January while mine output dropped 1.2%. Production at utilities rebounded 2.3%.

The report, measuring the output of factories, mines and utilities, showed a 2.6% year-over-year increase.

The rate of capacity utilization -- seen as a key measure of inflationary pressures for industry -- fell to 81.2%, 0.2 percentage points above its 1972-2006 average.

"The 0.5% decline in January industrial production was less than the 0.7% reduction in manufacturing production because of strong growth in utility output," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.

"January's decline in industrial activity basically offset the gain reported in December. Clearly, the unusually mild weather in December and severe cold weather in January had a large part to play in the up-and-down pattern over the last two months," explained Meckstroth.

Meckstroth points out that two of the largest markets for manufactured items -- housing and motor vehicles -- are declining which contributed to depress manufacturing activity.

Looking towards the rest of 2007 Meckstroth coments that "Industrial production in manufacturing is only expected to grow 2.5% in 2007 which is a little slower than the overall economic growth rate. Much of the growth in manufacturing this year is attributed to the high-tech sector."

Sources: Agence Presses-France, IndustryWeek Staff

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