January 15, 2021 10:00 AM, EST

Manufacturing Output Rose More Than Forecast in December

An assembly line for parts to be installed into ultra low temperature freezers is seen in Ohio in December 2020.An assembly line for parts to be installed into ultra low temperature freezers is seen in Ohio in December 2020. (Ty Wright/Bloomberg News)

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Production at U.S. manufacturers increased in December by more than projected, marking an eighth straight month of gains as steady yet more moderate demand growth and lean inventories continue to power the sector’s recovery.

Output at factories rose 0.9% from the prior month after a 0.8% gain in November, Federal Reserve data showed Jan. 15. Total industrial production, which also includes mines and utilities, jumped 1.6% in December, the most in five months, after an upwardly revised 0.5% gain.

The median estimate in a Bloomberg survey of economists called for 0.5% gains in both manufacturing output and industrial production.

An annualized 11.2% increase in fourth-quarter manufacturing production shows factory activity continues to steadily rebound. A slowly improving economy, still-lean inventories and prospects for stronger growth this year should continue to support the industry after the pandemic caused factory output to decline 6.9% for all of 2020.

Still, hurdles remain, including labor constraints at factories and surging COVID-19 infections that could limit the pace of recovery.

A separate Commerce Department report released Jan. 15 showed disappointing retail sales for December.

Other manufacturing measures point to resilience in the sector. The Institute for Supply Management’s measure of factory activity expanded in December at the fastest pace in more than two years, bolstered by an acceleration in new orders and the strongest production growth since 2011.

Meanwhile, beneath the hood of a disappointing December jobs report, manufacturing payrolls increased by a solid 38,000.

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