December Gain in US Manufacturing Output Wraps Up Weak Year

U.S. factory production unexpectedly increased in December, a bright spot in an otherwise weak year for manufacturing.

The 0.2% increase in manufacturing output followed a revised 1% gain in November, Federal Reserve data showed Friday. The median forecast in a Bloomberg survey of economists called for a 0.1% decline. For all of 2019, factory production fell 0.2%, the first decrease in three years.December factory output was held back by motor vehicle manufacturing, which fell 4.6%. Excluding cars, factory production rose 0.5%, the most in four months. Total industrial production, which includes mines and utilities, declined 0.3% as warmer weather reduced demand for heating.

Key Insights

• The December increase signals a pause in the manufacturing slump that began in 2019. While the U.S. and China signed the Phase One trade deal this week, factories are still contending with a business-investment slowdown and weak demand from foreign customers.
• Other manufacturing gauges continue to show weakness, including the Institute for Supply Management's measure which fell in December to the lowest level since 2009.
• Friday’s report showed gains in the output of construction materials, which jumped 1.6% in December. Production of primary metals, computers and electrical equipment also increased last month.

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• Capacity utilization, measuring the amount of a plant that is in use, fell to 77%, from 77.4%. Manufacturing capacity edged up to 75.2% from 75.1%.
• Utility output dropped 5.6% after rising 1% the prior month. Mining production increased 1.3%, reflecting a pickup in oil and gas well drilling as prices firmed.
• The Fed's monthly data are volatile and often get revised. Manufacturing, which makes up about three-fourths of total industrial production, accounts for about 11% of the U.S. economy.

By Katia Dmitrieva