Manufacturing Rebound Boosts U.S. Industrial Production

Industrial production rose 0.4 percent in December as manufacturing rebounded at its fastest pace in a year, the Federal Reserve reported on Wednesday.

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Industrial output rose at an annual rate of 3.1 percent for the fourth quarter as a whole, increasing for the tenth consecutive quarter.

Today’s report shows that the production side of the economy ended the year on firmer footing as manufacturing output rose 0.9 percent in December after contracting 0.4 percent in November, when overall industrial production declined 0.3 percent. The increase in manufacturing output in December 2011 was the largest since December 2010.

Manufacturing is responsible for a significant amount of the growth experienced in the U.S. since the end of the recession, but with the euro zone expected to slide back into recession in the first half of this year, slowing export growth will weigh on manufacturing.

Mining output rose 0.3 percent last month after rising 0.5 percent in November, as unseasonably warm weather saw utilities output dropping 2.7 percent after a 0.6 percent decline the previous month. December marked the fifth consecutive month of declines for utilities.

Capacity utilization, or how fully firms are using their resources, rose to 78.1 percent in December, up from 77.8 percent in November, though it remains 2.3 percent below the 1972-2010 average. Capacity use in manufacturing rose to 75.9 percent, the highest since June 2008.

Fed officials tend to look at utilization measures to determine how much “slack” remains in the economy, how much potential is left for growth before it becomes inflationary.

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