US factory output probably rose in January for the fifth straight month

MarketsAssociated Press

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

STEADILY HIGHER: Manufacturing output likely increased 0.5 percent last month, economists at JPMorgan Chase forecast. That would be higher than December's 0.3 percent rise, but below November's 1.3 percent blowout gain, which was driven by healthy auto production.

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Manufacturing output is the largest component of industrial production, which also includes utilities and mining. Overall industrial production is forecast to rise 0.3 percent in January, according to a survey of economists by data firm FactSet. That would follow a 0.1 percent drop in December, when sharply lower utilities production dragged down overall output.

STRONGER U.S., WEAKER OVERSEAS: U.S. employers have ramped up hiring, giving Americans more paychecks to spend. That's boosted demand for furniture, autos, computers and other manufactured goods.

Rising domestic spending is barely offsetting weakness overseas. Growth in the 19 European countries that share a common currency is sluggish. Japan has just exited recession. And China's economy is growing at a slower pace than it has historically. U.S. exports fell in December, increasing the trade gap to its widest level in more than two years.

In addition, the rising value of the dollar against other currencies makes U.S. products more expensive abroad. All of those hurdles mean U.S. manufacturers are relying on domestic demand for growth.

Overall, recent data has painted a mixed picture of U.S. factories' health.

A survey earlier this month by the Institute for Supply Management, a trade group of purchasing managers, found that factories nationwide expanded in January, but at the slowest pace in a year. Measures of orders, production and hiring all weakened from the previous month.

Companies are also investing less in heavy equipment. A separate report from the Commerce Department this month showed that orders received by U.S. factories have fallen for five straight months. Orders for machinery, industrial equipment and other big-ticket items — a category that is a proxy for businesses' investment plans — fell for the fourth straight month in December.