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WASHINGTON—U.S. industrial production rose sharply in December, boosted by gains in utilities output as cold weather swept across the nation and increased demand for heating.
Industrial production—a measure of output at factories, mines and utilities—rose a seasonally adjusted 0.9% in December from the prior month, the Federal Reserve said Wednesday.
Economists surveyed by The Wall Street Journal had expected the index to rise 0.5%. November industrial production was revised to a 0.1% decline from an originally reported gain of 0.2%.
From a year earlier, industrial production rose 3.6% in December, the largest annual gain since 2010. In the fourth quarter as a whole, industrial production jumped 8.2% at an annual rate “after being held down in the third quarter by Hurricanes Harvey and Irma,” the Fed said.
“This is a story about the cold weather and the rebound in oil production in the wake of higher prices,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients. “With oil production likely to keep rising, production should start 2018 strongly.”
Wednesday’s report showed output in the volatile mining sector increased 1.6% in December, which the Fed said was mainly because of a gain in oil and gas extraction. The mining index was up 11.5% from a year earlier.
Utility output grew 5.6% from the prior month, “as the record-breaking cold weather in the Northeast boosted electricity and gas demand,” said Michael Pearce, senior U.S. economist at Capital Economics, in a note to clients.
The first half of December was warm in much of the eastern U.S. A cold air outbreak hit areas east of the Rockies the last week of December, holding down monthly temperatures for the nation as a whole, according to the National Oceanic and Atmospheric Administration. The average temperature in the Northeast last month was 25.7 degrees, 2.7 degrees below normal.
”That cold streak continued into the first week of January too, so utilities output will remain elevated at the beginning of 2018 too,” Mr. Pearce said.
Manufacturing output, the biggest component of industrial production, edged up 0.1% in December. The December increase shows a pullback in growth from October and November, when output grew 1.5% and 0.3% respectively.
Capacity use, a measure of slack in the industrial economy, increased 0.7 percentage point to 77.9% in December. Economists had expected capacity utilization of 77.3% in December.
The longer-term trend in manufacturing has illustrated a pickup in the sector over the past year, due to a weaker dollar, more stable oil prices and global economic growth.
The U.S. factory sector posted one of its best months of the economic expansion in December as sales hit a 14-year high, the Institute for Supply Management said earlier this month.
Industrial production was knocked off course in the third quarter, as hurricanes that battered the southern and eastern U.S. in the late summer caused refineries and plants on the Gulf Coast to shut down and stalled other keys parts of the manufacturing process.
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