WASHINGTON (Reuters) – U.S. manufacturing output increased more than expected in December, but disruptions to the supply chain as the relentless pandemic keeps some workers at home could slow production in the months ahead.
Manufacturing production rose 0.9% last month after advancing 0.8% in November, the Federal Reserve said on Friday. That was the eighth straight monthly gain in factory production. Manufacturing is being supported by a shift in demand towards goods from services.
Economists polled by Reuters had forecast manufacturing output rising 0.5% in December. A survey last this month showed suppliers struggling to deliver materials to manufacturers, labor and transportation constraints because of the coronavirus.
Motor vehicles and parts output declined 1.6% in December. Excluding autos, manufacturing output increased 1.1%.
Production at factories increased at a 11.2% annualized rate in the fourth quarter.
The strength in manufacturing output combined with a 6.2% surge utilities and 1.6% jump in mining to boost industrial production by 1.6% in December. That followed a 0.5% gain in November. Industrial production increased at a 8.4% rate in the fourth quarter.
Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, rose 0.7 percentage points to 73.4% in December. Overall capacity use for the industrial sector increased 1.1 percentage points to 74.5%. It is 5.3 percentage points below its 1972-2019 average.
Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy — how far growth has room to run before it becomes inflationary.
(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)