Economy

Cold weather causes factory output to drop

WASHINGTON (AP) — Harsh winter weather led to a steep drop in U.S. factory output in January. Manufacturers made fewer cars and trucks, appliances, furniture and carpeting, as the recent cold spell ended five straight months of increased production

The Federal Reserve said factory production plunged 0.8 percent in January, reversing gains of 0.3 percent in both December and November. Automakers lost days of production because of snowstorms, as their production plummeted 5.1 percent, the report said.

Factory output rose a modest 1.3 percent over the past 12 months. Overall industrial production, which includes manufacturing, mining and utilities, fell 0.3 percent in January. Output for utilities rose 4.1 percent last month as the freezing temperatures boosted heating demand.

Factories responded to the weather by running at a lower 76 percent capacity, a 0.7 percentage point drop over the month and 2.7 percentage points below the long-run average. The repeated battery of winter storms has slowed down the pace of economic growth, ending momentum that has boosted gross domestic product in the second half of last year. Cold weather last month delayed shipments of raw materials and caused some factories to shut down.

The Institute for Supply Management, a trade group of purchasing managers, reported earlier this month that its index of manufacturing activity fell to 51.3 in January from 56.5 in December. It was the lowest reading since May, although any reading above 50 signals growth.

Factory orders also fell 1.5 percent in December, according to the Commerce Department. That could have contributed to less output in January. The figures suggest that U.S. manufacturing is slowing after strong gains at the end of last year. Auto sales approached 15.6 million last year but buying has since decelerated. Businesses are spending cautiously on machinery and other large factory goods. The slowdown means that economic growth in the first three months of this year will probably come in significantly below the strong 3.6 percent annual pace in the second half of 2013.

The economic forecaster Macroeconomic Advisers projected Thursday that growth this quarter would be 1.7 percent.

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