(Feb 14): US industrial production rose in January by more than forecast, boosted by utilities usage in a month marked by colder temperatures, while a sharp decline in motor vehicle output restrained manufacturing.

The 0.5% increase in production at factories, mines and utilities followed a revised 1% gain a month earlier, Federal Reserve data showed on Friday. The median estimate of Bloomberg survey of economists was a 0.3% increase.

Manufacturing output, which accounts for three-fourths of total industrial production, slipped 0.1% due to the weakest auto production in three months. Excluding autos, factory output rose 0.2% after a sharp December advance.

Output at utilities jumped 7.2%, the most in three years, while mining decreased 1.2%.

Manufacturing, which accounts for three-fourths of total industrial production, has recently showed signs of stabilising amid resilient consumer spending and firm, yet uneven, business investment. 

Nonetheless, producers are challenged by a number of headwinds, including a stronger dollar that makes US goods costlier for overseas customers. There’s also a risk domestic manufacturers will bear the brunt of any reciprocal tariffs from other countries in response to those imposed by the Trump administration. 

The dip in January factory output also reflected decline in production of plastics and rubber products, as well as printing and food, according to the Fed. Aerospace industry production jumped for a second month, likely reflecting the impact of Boeing Co after resolution of a machinists’ strike months ago.

By market group, production of business equipment climbed 2.1%, partly reflecting the largest gain in output of information processing gear since July. Consumer-goods production was the strongest in five months and led by non-durable goods.

The Fed’s report showed capacity utilisation at factories, a measure of potential output being used, fell to 76.3%. The overall industrial utilisation rate increased to 77.8%.

A separate report on Friday showed retail sales slumped last month by the most in nearly two years, indicating an abrupt pullback by consumers after an end-of-2024 spending spree. The slowdown across most retail categories suggests other factors than the snowstorms and fires may be at play. Consumers are dealing with stubborn inflation, high borrowing costs rising debt levels.

Manufacturers are signalling that the industry is emerging from malaise. The Institute for Supply Management’s latest measure of factory activity expanded last month for the first time since 2022 as orders ramped up and production quickened.

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