Severe Winter Contributes To Unexpected Drop In U.S. Industrial Production

(RTTNews) - With severe weather curtailing manufacturing production in some regions of the country, the Federal Reserve released a report on Friday showing that U.S. industrial production unexpectedly decreased in the month of January.

The report said industrial production fell by 0.3 percent in January after rising by 0.3 percent in December. The pullback came as a surprise to economists, who had expected production to increase by another 0.3 percent.

The unexpected drop in industrial production was partly due to the weather-related weakness in the manufacturing sector.

Manufacturing production dropped by 0.8 percent in January following a downwardly revised 0.3 percent increase in the previous month.

The report also showed a notable pullback in production at mines, which declined by 0.9 percent in January after jumping by 1.8 percent in December.

On the other hand, a jump in utilities output helped to limit the downside for production, as demand for heating was boosted by the unseasonably cold temperatures.

The Fed said the output of utilities surged up by 4.1 percent in January after tumbling by 1.4 percent in December.

Chris Williamson, chief economist at Markit, said, "A surprise fall in industrial production in January provides further signs that the U.S. economy is going through a tough spot as harsher than usual winter weather causes widespread disruptions."

"The Fed will most likely disregard the figures and continue to taper, although any further weakness on the data flow in coming months could prompt a rethink," he added

The report also showed that the capacity utilization rate fell to 78.5 percent in January from a revised 78.9 percent in December.

Capacity utilization in the manufacturing and mining sectors dropped to 76.0 percent and 89.2 percent, respectively, while capacity utilization in the utilities sector climbed to 83.3 percent.