Partly reflecting a sharp pullback in utilities output, the Federal Reserve released a report on Friday unexpectedly showing a modest decrease in U.S. industrial production in the month of December.
The Fed said industrial production edged down by 0.1 percent in December after climbing by an upwardly revised 0.7 percent in November.
Economists had expected industrial production to rise by 0.4 percent compared to the 0.5 percent increase originally reported for the previous month.
The unexpected dip in production came as utilities output tumbled by 1.5 percent in December after a revised 1.9 percent jump in November.
The report showed manufacturing output also fell by 0.3 percent in December following a 0.6 percent increase in the previous month.
Meanwhile, the Fed said mining output surged up by 2.0 percent in December after rising by 0.5 percent in November.
“Solid demand will keep industrial production growing strongly in 2022,” said Oren Klachkin, Lead US Economist at Oxford Economics. “There are still plenty of orders for factories to fill, and the recent spike in Covid cases could keep goods demand elevated for longer.”
“Meanwhile, industrial supply chains will continue to face a difficult operating environment this year; the latest surge in cases already looks to be exacerbating labor problems,” he added. “While we expect bottlenecks to eventually loosen, we shouldn’t discount the risk that supply chain conditions could still worsen before they improve.”
The report said capacity utilization for the industrial sector edged down to 76.5 percent in December from a downwardly revised 76.6 percent in November.
Economists had expected capacity utilization to inch up to 77.0 percent from the 76.8 percent originally reported for the previous month.
Capacity utilization in the manufacturing and utilities sectors dipped to 77.0 percent and 71.0 percent respectively, while capacity utilization in the mining sector rose to 79.1 percent.
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