Business
Manufacturing Output in the U.S. Climbs in January
Although manufacturing output at American factories increased in January, it was substantially lower than initially estimated due to higher borrowing rates that are harming the industry.
According to data released by the Federal Reserve on Wednesday, manufacturing output rose 1.0% in December. The previously estimated 1.3% decline in factory production for December was revised down to a 1.8% decrease. Economists polled by Reuters had forecast factory production would increase 0.8%.
On a yearly basis, output increased 0.3% in January. The demand for goods, which are typically purchased on credit, has been weakened by increased interest rates, which affect manufacturing, which makes up 11.3% of the US GDP.
The national factory activity index from the Institute for Supply Management has decreased for three months running. Since last March, the Fed has increased its policy rate by 450 basis points, moving it from near zero to a range of 4.50%–4.75%. The majority of the hikes occurred between May and December. In March and May, two further rate increases of 25 basis points are anticipated.
After two consecutive months of decline, production at auto manufacturers increased 0.5% in January. Additionally, there were increases in the production of durable manufactured items such as machinery, electronics, electrical equipment, appliances, and components. Food and other non-durable commodities production have also increased.
After falling for two consecutive months, mining output increased by 2.0%. Due to the unexpectedly mild conditions, which reduced demand for heating, utilities production fell 9.9%.
The gains in mining and manufacturing balance the decline in utilities, maintaining the level of overall industrial production. In December, industrial output fell 1.0%.
The manufacturing sector’s capacity utilization, a gauge of how fully businesses are utilizing their resources, increased by 0.6 percentage points in January to 77.7%. It is 0.5 points under its long-term average.
In January, the industrial sector’s overall capacity use fell 0.1 percentage points to 78.3%. Its 1972–2021 average is 1.3 percentage points lower.
The U.S. central bank’s officials frequently analyze capacity use indicators to determine how much “slack” there is in the economy and how much longer growth can continue before it starts becoming inflationary.
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