Production at U.S. manufacturers rose in January by more than forecast, a fourth-straight monthly advance that shows factories continue to recover from pandemic-related disruptions last year.

Output at factories increased 1 per cent from the prior month after a 0.9 per cent gain in December, according to Federal Reserve data Wednesday that compared with economists’ estimates for a 0.7 per cent rise.

Total industrial production, which also includes mines and utilities, advanced 0.9 per cent in January after a revised 1.3 per cent increase a month earlier.

The Fed’s index of factory output is just 1.9 per cent below its pre-pandemic level, a sign that factories are benefiting from lean inventories and steady demand. While supply chain disruptions and labor shortages continue to present challenges, these pandemic-related setbacks should dissipate as vaccinations pick up.

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The gain in factory output was broad-based, with increases in production of consumer goods, business equipment, construction materials and non-durable products. Meanwhile, auto production dropped due to a shortage of semiconductors, the Fed said.

In a separate report Wednesday, retail sales surged in January by the most in seven months, beating all estimates and suggesting fresh stimulus checks helped spur a rebound in household demand following a weak fourth quarter.

Digging Deeper

  • Manufacturing capacity utilization picked up to 74.6 per cent from 73.9 per cent, while total capacity utilization, including factories, mines and utilities, increased to 75.6 per cent from 74.9 per cent
  • The overall plant-use rate is just below the pre-pandemic level of 76.9 per cent. Unused capacity weighs on corporate profits
  • Utility output declined 1.2 per cent in January while mining output increased 2.3 per cent
  • Oil and gas well drilling increased 11.3 per cent though remains more than 50 per cent below year-ago levels