By Xavier Fontdegloria

Factory output in the U.S. declined in December following two months of gains as manufacturing production continued to be hampered by supply-chain constraints and unusually warm weather weighed on utility energy.

Industrial production--which includes factory, mining and utility output--fell at a seasonally adjusted 0.1% in December compared with the previous month, the Federal Reserve said Friday. Economists polled by The Wall Street Journal expected factory output to grow 0.2% on month.

In November, industrial production rose by an upwardly revised 0.7%.

December's drop marks the first contraction in industrial output since September, when the effects of Hurricane Ida weighed on production. Factory activity has been crippled for months due to severe supply-chain strains, and a shortage of raw materials and components, which have caused an increase in costs.

Recent surveys to goods producers show signs that these bottlenecks eased somewhat at year-end, but economists warn that normalcy in the supply chains is still several months away.

Manufacturing output--the biggest component of industrial production--fell 0.3% in December compared with November. Motor vehicle and parts production decreased 1.3%, signaling that supply and component shortages persisted.

Mining output rose 2%, primarily reflecting gains in the oil and gas sector, the Fed said. Utilities output decreased 1.5% as demand for heating fell due to warmer-than-normal weather.

On an annual basis, industrial production in December rose 3.7%, the Fed said. Output stood 0.6% above its February 2020 pre-pandemic level, it said.

Capacity utilization--which reflects how much industries are producing compared with what they could potentially produce--decreased by 0.1 percentage point to 76.5% in December. Economists expected it to increase to 77%.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

-0- 

(END) Dow Jones Newswires

January 14, 2022 09:52 ET (14:52 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.