After reporting a modest decrease in U.S. industrial production in the previous month, the Federal Reserve released a report on Wednesday showing production rebounded by much more than anticipated in the month of January.
The Fed said industrial production jumped by 1.4 percent in January after edging down by 0.1 percent in December. Economists had expected industrial production to rise by 0.4 percent.
The much bigger than expected rebound in industrial production was led by a spike in utilities output, which skyrocketed by 9.9 percent in January after tumbling by 1.8 percent in December.
Utilities output soared as the demand for heating surged amid the arrival of significantly colder-than-normal temperatures.
The report showed mining output also increased by 1.0 percent in January after jumping by 1.5 percent in December, while manufacturing output crept up by 0.2 percent after dipping by 0.1 percent in the previous month.
“Looking ahead, industrial production will have a solid year, but growth won’t be as strong as last year,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics. “The biggest question facing the industrial sector is how quickly will supply chain and hiring headwinds dissipate.”
“We expect these challenges to diminish slowly as the economy learns to live with Covid,” he added. “However, even if the virus disappeared overnight, it would take a while for supply chains to completely heal.”
The Fed also said capacity utilization for the industrial sector rose to 77.6 percent in January from an upwardly revised 76.6 percent in December.
Economists had expected capacity utilization to inch up to 76.8 percent from the 76.5 percent originally reported for the previous month.
Capacity utilization in the utilities sector surged to 78.1 percent, while capacity utilization in the mining and manufacturing sectors edged up to 79.1 percent and 77.3 percent, respectively.
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