WASHINGTON: US industrial production increased more than expected in December as unseasonably cold weather at the end of the month boosted demand for heating, but manufacturing output barely rose, pointing to moderate growth in the industrial sector.
Strong demand for utilities reported by the Federal Reserve on Wednesday bolstered expectations of an acceleration in consumer spending in the fourth quarter, prompting some economists to bump up their economic growth estimates for the October-December period.
“This is consistent with the solid growth story,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The Fed said industrial output surged 0.9 per cent last month also buoyed by robust gains in mining production, after slipping 0.1 per cent in November.
For all of 2017, industrial output rose 1.8 per cent, the first and largest increase since 2014. In another report, the US central bank said the economy continued to expand from late November through the end of 2017.
In its Beige Book report of anecdotal information on business activity collected from contacts nationwide, the Fed said “the outlook for 2018 remains optimistic for a majority of contacts across the country.”
Manufacturing output, which accounts for more than 70 per cent of industrial production, gained only 0.1 per cent in December. Data for October and November was, however, revised to show factory output rising 1.5 per cent and 0.3 per cent respectively instead of the previously reported 1.4 per cent and 0.2 per cent.
Manufacturing production rose at a 7.0 per cent rate in the fourth quarter, the biggest gain since the second quarter of 2010. It increased 1.3 per cent in 2017, the largest rise since 2012.
The industrial sector is being supported by a strengthening global economy and recent dollar weakness, which is helping to make US exports more competitive relative to those of the nation’s main trading partners.
Mining production increased 1.6 per cent in December amid a rebound in oil and gas well drilling. Utilities production accelerated 5.6 per cent last month after declining 3.1 per cent in November.
Bitter cold gripped a large part of the country at the end of December. The surge in utilities demand added to strong December retail sales in supporting expectations of an acceleration in consumer spending in the fourth quarter.