US factory output likely rose last month, despite higher dollar, global slowdown

Energy Associated Press

The Federal Reserve reports on industrial production for December. The report will be released Friday at 9:15 a.m. Eastern.

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MODEST RISE IN OUTPUT: Economists at JPMorgan Chase forecast that manufacturing output likely increased 0.3 percent last month. That would be weaker than November's 1.1 percent gain, which was driven by a big jump in auto production.

Manufacturing output is the largest component of industrial production, which also includes utilities and mining. Overall industrial production likely slipped 0.1 percent in December, according to a survey of economists by data firm FactSet. The small decline would follow a big 1.3 percent jump in November.

UTILITIES, OIL DRILLING DOWN: Analysts expect the decline in total industrial production will be driven by a sharp drop in utilities' output. December was a warmer-than-usual month nationwide and followed November's unseasonable cold. That suggests a sharp drop in heating demand likely occurred.

Separately, plummeting oil prices are likely holding back mining output, which includes oil and gas drilling.

Recent reports on U.S. manufacturing have been mixed, but overall they point to modest growth.

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Factory activity expanded at a solid pace last month, according to a survey by the Institute for Supply Management, but much more slowly than in November. The survey found that measures of orders and production grew at a weaker pace.

Meanwhile, manufacturers in New York state expanded more quickly in January than the previous month, according to a survey by the Federal Reserve Bank of New York, released Thursday. Also Thursday, another survey found manufacturers in Philadelphia grew more slowly.

And orders for U.S. manufactured goods fell in November, the government said last week, as factories saw less demand for industrial machinery and primary metals such as steel.

U.S. manufacturing is being challenged by a turbulent global economy. Japan has dipped into recession. Tepid growth has trapped much of Europe. China, the world's industrial behemoth, is trying to tighten credit and reform its opaque financial sector.

The rising value of the dollar against other currencies makes U.S. products more expensive abroad, meaning that U.S. manufacturers will need to rely on domestic demand for growth.