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February 17, 2016 8:45 AM, EST
Manufacturing Output Rises by Most Since July 2015
Ty Wright/Bloomberg News

U.S. manufacturing output rose in January by the most since July 2015, a sign the industry was starting to stabilize at the beginning of the year.

The 0.5% advance at factories, which make up 75% of all production, followed a 0.2% decrease the prior month, a Federal Reserve report showed Feb. 17. Total output, which also includes mines and utilities, jumped a larger-than-projected 0.9%.

Factory production was boosted by a surge in output of consumer goods, both durables such as motor vehicles and nondurables, as well as business supplies. The improvement indicates the worst of the drag from a stronger dollar, malaise in overseas markets and less spending in the energy sector may be starting to dissipate.

“The manufacturing sector is in the process of bottoming out,” Thomas Simons, an economist at Jefferies Group in New York, said before the report. “It’s going to take a while before we get an acceleration in manufacturing, but we should start to see more stabilization.”

The median forecast in a Bloomberg News survey of economists called for a 0.2% rise in manufacturing output. The previous month’s reading was revised from a 0.1% drop.

For total industrial production, the Bloomberg survey median called for a 0.4% rise. The prior month was revised to a 0.7% decrease from a previously reported 0.4% decrease.

Utility output surged 5.4%, the most since December 2009, after a 2.9% drop the previous month, the Fed report showed. Production rebounded as more seasonable weather revived demand for home heating after the warmest December on record.

Mining production, which includes oil drilling, was unchanged after four straight declines. Weaker prices for oil and other commodities are weighing on mining, economists predict. Rig counts still are falling, reflected in depressed drilling activity. The Fed’s report showed drilling dropped 5.9% last month.

Capacity utilization, which measures the amount of a plant that is in use, rose to 77.1% from 76.4% in the prior month.

Factory output of consumer goods climbed 1.6% after falling four consecutive months. The output of motor vehicles and parts increased 2.8%. Excluding autos and parts, manufacturing rose 0.3% after no change.

Vehicle demand continues to be a mainstay for factories. Purchases of cars and light trucks rose to a 17.5 million annualized rate in January, from 17.2 million a month earlier, according to Ward’s Automotive Group.

Machinery production rose 0.7%, the Fed report showed. Output of all business equipment increased 0.3%, the first gain in five months.

Recent reports showed factory payrolls rose in January by the most in more than a year, and hours worked climbed.