WASHINGTON (Reuters) – U.S. manufacturing production unexpectedly fell in January, weighed down by a sharp decline in motor vehicle output.
Factory output dipped 0.1% last month after a downwardly revised 0.5% rebound in December, the Federal Reserve said on Friday. Economists polled by Reuters had forecast production edging up 0.1% after a previously reported 0.6% surge.
Production at factories increased 1.0% on a year-on-year basis in January. Manufacturing, which accounts for 10.3% of the economy, has been recovering as the U.S. central bank started cutting interest rates in September.
But the nascent recovery is threatened by President Donald Trump’s protectionist trade policy, which economists have warned would fracture supply chains and create shortages that raise raw material prices.
A 10% additional tariff on Chinese goods was imposed this month while a 25% levy on imports from Canada and Mexico was suspended until March. A 25% tariff on all steel and aluminum imports goes into effect next month.
Uncertainty over the economic impact of the Trump administration’s policies, including tax cuts and mass deportations, has diminished the chances of the Fed resuming rate cuts after pausing in January.
Motor vehicle and parts output plunged 5.2% last month. Durable manufacturing production was unchanged as the weakness in motor vehicle output offset a 6.0% increase in aerospace and miscellaneous transportation equipment.
This category continues to recover following a crippling strike Boeing factory workers in late 2024. Nondurable manufacturing production fell 0.3% amid declines in the output of food, beverage and tobacco, printing and support as well as petroleum and coal, and plastics and rubber products.
Mining output dropped 1.2% after rising 2.0% in December.
Utilities production surged 7.2% as freezing temperatures boosted demand for heating. That followed a 2.9% rebound in December.
Industrial production rose 0.5% last month after surging 1.0% in December. It advanced 2.0% year-on-year in January.
Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, rose to 77.8% from 77.5% in December. It is 1.8 percentage points below its 1972–2024 average. The operating rate for the manufacturing sector slipped 0.1 percentage to 76.3%. It is 1.9 percentage points below its long-run average.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
