US manufacturing output will drop in January due to weak automobile production

WASHINGTON (Reuters) – U.S. manufacturing production fell unexpectedly in January, causing a sharp drop in automobile production.

Last month, the plant’s production immersed 0.1% after a 0.5% rebound downward revision in December, the Federal Reserve said Friday. Economists voted by Reuters predicted production rose 0.1% after a previously reported 0.6% surge.

Factory production increased 1.0% year-on-year in January. Manufacturing, which accounts for 10.3% of the economy, is recovering as the US Central Bank began cutting interest rates in September.

But the early recovery is threatened by President Donald Trump’s protectionist trade policy, with economists warning that it will destroy supply chains and create a shortage of rising raw material prices.

This month, a 10% extra charge was charged on Chinese products, and 25% collection of imports from Canada and Mexico was suspended until March. Next month, a 25% tariff will be enforced on all steel and aluminum imports.

Uncertainty over the economic impact of Trump administration policies, including tax cuts and massive deportation, reduced the likelihood that the Fed would reopen after a suspension in January.

Automotive and parts output plunged 5.2% last month. Durable manufacturing production did not change as weak automobile power offset a 6.0% increase in aerospace and other transport equipment.

The category continues to recover after stolen Boeing factory workers in late 2024. Unreliable manufacturing production fell by 0.3% amid declining production of food, beverages, tobacco, printing and support, oil, coal, plastics and rubber bands.

After a 2.0% increase in December, mining output fell by 1.2%.

Utility production skyrocketed by 7.2% as freezing temperatures increased demand for heating. That followed a 2.9% rebound in December.

It rose 0.5% last month after a 1.0% spike in December. It increased by 2.0% year-on-year in January.

Capacity utilization in the industrial sector is entirely a measure of how businesses are using their resources, rising from 77.5% in December to 77.8%. It is 1.8 percentage points below the 1972-2024 average. The manufacturing sector’s operational rate has been reduced from 0.1% to 76.3%. This is 1.9 points below the long-term average.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)