Washington, Feb. 14 (Bloomberg) -- U.S. industrial production rose in January by the most in six months, as factories turned out more autos and parts, the Federal Reserve reported. Production at factories, mines and utilities jumped 0.7 percent last month, after a 0.4 in December, the Fed said. The rise was the biggest since a 0.7 percent increase in July and was led by a 4.9 percent jump in assembly of vehicles and components. Excluding autos, output rose 0.1 percent last month. The gain was consistent with a recent survey showing that factories increased production in January for a third straight month, economists said. The decline in jobs at producers last month was the smallest in six months. Manufacturing, which accounts for a seventh of the economy, has tracked the uneven recovery as companies, wary that a war with Iraq would cause growth to slow, stock just enough goods to meet demand.
``The strength is in auto production, which has been responsible for each positive production number since the recession ended in late 2001,'' said Christopher Low, chief economist at FTN Financial in New York, before the report. Economists had expected a 0.3 percent gain in industrial production, based on the median of 62 forecasts in a Bloomberg News survey, following the previously reported 0.2 percent decline for December. Earlier today, the Commerce Department reported that business inventories in December rose for an eighth straight month as companies replenished stockpiles to keep pace with demand. The value of goods on hand at manufacturers, retailers and wholesalers jumped 0.6 percent to $1.143 trillion, reflecting increases in building materials, clothing and food, after a 0.3 percent gain in November. Sales climbed 0.2 percent after a 0.1 percent rise the previous month.
Plant-Use Rate
The proportion of industrial capacity in use rose to 75.7 percent last month from 75.2 percent. Capacity utilization reached an 18-year low of 74.6 percent in December 2001. Economists in the survey had expected the ratio to rise to 75.6 percent. During the 10-year expansion that ended in March 2001, plant use averaged 82 percent. Work at factories, which accounts for almost 90 percent of industrial production, jumped 0.5 percent last month, the biggest gain in a year, after dropping 0.4 percent in December. Production of consumer durable goods, which includes automobiles, furniture and electronics, increased 2.6 percent after declining 2.5 percent the previous month. The rise in production of autos and parts followed a 5.3 percent drop in December. American Axle & Manufacturing Holdings Inc., the second-largest maker of automobile-drive systems, increased fourth-quarter profit 66 percent as carmakers such as General Motors Corp. and DaimlerChrysler AG ordered more parts for sport-utility vehicles and pickup trucks.
Business Equipment
Business equipment production, which includes transportation and information processing equipment, jumped 1 percent in January after falling 1.3 percent the previous month. Production of computers and other office equipment rose 1.1 percent after a gain of 1.5 percent. Production of non-durable consumer goods, which include food, clothing and paper products, increased 0.5 percent in January after declining 0.1 percent the previous month, today's report showed. Electric and gas utility production jumped 4 percent last month after declining 1.4 percent in December. Mine production dropped 1.2 percent last month after increasing 1 percent a month earlier. Industrial production is forecast to rise 2.5 percent in 2003, the first increase in two years, according to the latest Blue Chip Economic Indicators survey of economists. The Institute for Supply Management's factory index registered 53.9 in January, the third straight month exceeding 50, which indicates expansion.
Factory Job Losses
Factories shed 16,000 jobs last month, the smallest drop since losing 15,000 jobs in July, the government said earlier this month. A survey by the National Association of Manufacturers issued this week showed 17 percent of factories expect to hire more workers in the first half of the year. Twice as many expect to do so from July through December. Manufacturing employment has been declining since August 2000. The survey of the trade group's 79-member board of directors also found one in five factories expects to reduce spending on equipment and software this year. It showed that about 56 percent said they would boost their spending on new equipment by as much as 5 percent by year end. ``Capital investment is key to a strong rebound,'' said Jerry Jasinowski, the association's president. ``Our directors expect only modest improvement in 2003.'' Manufacturers ``expect weak economic growth early in 2003, picking up modestly as the year wears on,'' he said. Those expectations fall in line with the Federal Reserve's projection that growth will accelerate during the year. The economy may expand at a 3.25 percent to 3.5 percent inflation- adjusted rate this year when measured between the fourth quarter of 2002 and the last three quarters of 2003. //www.quote.bloomberg.com