Factory output rose a modest 0.2 percent after flat December

By Christopher S. Rugaber
AP Economics Writer

WASHINGTON (AP) — U.S. factory production edged up last month as manufacturers cranked out more computers, clothing, steel and other metals, offsetting declines in autos and aerospace.

The Federal Reserve said Wednesday that factory production increased 0.2 percent in January, after a flat reading in December. The data suggests manufacturing is still supporting economic growth, though is weaker than last year.

Strong hiring has given Americans more money to spend, which has boosted demand for autos, electronics and other manufactured goods. At the same time, weak growth overseas has dragged down U.S. factories’ exports.

Overall industrial production, which includes mining and utilities, also increased 0.2 percent in January after slipping 0.3 percent in December. Utility output rose 2.3 percent as heating demand increased. Mining production fell 1 percent due to a big drop in oil and gas drilling.

Oil prices have fallen by about half since last summer. That has caused drilling companies to hold off on digging new wells and has limited oil and gas extraction, which is included in mining output.

Greater U.S. consumer spending is barely offsetting the impact of weakness overseas. Spending grew in the final three months of last year at the fastest pace in nine years. Yet retail sales were weak in December and January as consumers have yet to spend their savings from lower gas prices.

Growth in the 19 European countries that share a common currency is sluggish. Japan has just exited recession. And China’s economy is growing at a slower pace than it has historically. U.S. exports fell in December, increasing the trade gap to its widest level in more than two years.

In addition, the rising value of the dollar against other currencies makes U.S. products more expensive abroad. All of those hurdles mean U.S. manufacturers are relying on domestic demand for growth.

Other recent data also suggests manufacturing is growing, but at a sluggish pace.

A survey earlier this month by the Institute for Supply Management, a trade group of purchasing managers, found that factories nationwide expanded in January, but at the slowest pace in a year. New orders, production and hiring all weakened from the previous month.

Companies are also investing less in heavy equipment. A separate report from the Commerce Department this month showed that orders received by U.S. factories have fallen for five straight months. Orders for machinery, industrial equipment and other big-ticket items — a category that is a proxy for businesses’ investment plans — fell for the fourth straight month in December.