By David Harrison and Paul Kiernan

WASHINGTON--U.S. industrial production decreased in December, as a sharp drop in utilities output offset a slight gain in factory production.

Industrial production, a measure of factory, mining and utility output, fell a seasonally adjusted 0.3% in December from the prior month, the Federal Reserve said Friday, in line with expectations of economists surveyed by The Wall Street Journal.

Manufacturing output, the biggest component of industrial production, increased 0.2% in December from the previous month. But that gain was countered by a 5.6% decline in utilities output because of lower demand for heating due to unseasonably warm December weather, the Fed said.

The drop in overall industrial production came during a month when U.S. and China officials agreed to the first phase of a trade deal, a truce in a dispute that weighed on the global manufacturing sector for much of 2019. U.S. industrial production was down 1% in December from a year earlier.

Excluding motor vehicles and parts, industrial production advanced 0.6% in December from November. Meanwhile, mining production increased 1.3%.

Capacity utilization, which reflects how much industries are producing compared to what they could potentially produce, decreased by 0.4 percentage point to 77% in December, matching economists' expectations.

November's industrial production was revised down to a 0.8% rise, compared to an earlier estimate of a 1.1% increase.

Friday's report comes amid signs that U.S. factories are heading into 2020 on uneven footing. The Institute for Supply Management reported earlier this month that manufacturing activity contracted in December for the fifth straight month, while data firm IHS Markit also said factory activity slowed last month.

Still, the U.S. and China on Wednesday signed the phase one trade agreement, which includes commitments by Beijing to step up purchases of U.S. manufactured goods by around $80 billion, a development that could bode well for factory output this year.

(END) Dow Jones Newswires

January 17, 2020 09:30 ET (14:30 GMT)

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