Factory production declines by most since May 2009

Factory production in the U.S. unexpectedly declined in January by the most since May 2009, adding to evidence severe winter weather weighed on the economy. More

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manufacturing

Factory production declines by most since May 2009

Posted 2/14/14

WASHINGTON – Factory production in the U.S. unexpectedly declined in January by the most since May 2009, adding to evidence severe winter weather weighed on the economy.

The 0.8 percent decrease at manufacturers followed a revised 0.3 percent gain the prior month that was weaker than initially reported, figures from the Federal Reserve showed Friday in Washington. The median forecast in a Bloomberg survey of economists called for a 0.1 percent advance. Total industrial production dropped 0.3 percent even as utility output climbed the most in almost a year.

Assembly lines slowed last month as colder weather tempered production, the Fed said, showing a pause in the momentum of an industry that’s helped bolster the economy. A pickup in capital spending and faster hiring that drives consumer purchases will be needed to spur production gains.

“Our assumption is that this is a temporary soft patch,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Conn., who called for a 0.2 percent drop in factory output. “You’ve had pretty moderate growth in manufacturing, and I think in all likelihood that’s what’s going to repeat in 2014. It’s important not to overreact to the weakness that you’re seeing now.”

The decline in overall industrial production was the biggest since April 2013. Estimates of the 87 economists surveyed by Bloomberg ranged from a decrease of 1.4 percent to a gain of 0.7 percent.

Stocks were declined after the figures, with the Standard & Poor’s 500 Index falling 0.1 percent to 1,828.75 at 9:36 a.m. in New York.

Broad-based decline

The drop in manufacturing, which makes up 75 percent of total production, was broad-based, with declines in the output of business equipment, consumer goods and construction materials. The Fed said in its release that severe weather “curtailed production in some regions of the country.”

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