The number: U.S. industrial production fell 0.7% in December, the Federal Reserve reported Wednesday. It is the biggest monthly decline since September 2021.
The decline was steeper than economists expectations of a 0.1% decline, according to a survey by The Wall Street Journal.
Output in November was revised down to a 0.6% drop, much worse than the initial estimate of a 0.2% decline.
Production was down at a 1.7% annual rate in the fourth quarter.
Capacity utilization fell to 78.8% in December from a revised 79.4% in the prior month. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities.
Economists had forecast a 79.6% rate.
Key details: Manufacturing alone fell a sharp 1.3% in December after a 1.1% drop in the prior month.
Motor vehicles and parts output dropped 1% after a 3.5% fall in the prior month.
Utilities output rose 3.8% in December on cold weather. Mining output, which includes oil and natural gas, fell 0.9% after a 1.2% fall in the prior month.
Big picture: Weakness in industrial output is gathering steam. Business investment is being held down by rising interest rates, the strong dollar and the weak global economy.
Looking ahead: “The manufacturing sector appears to be in a recession and, even if China’s emergence from its Covid restrictions provide some boost later this year, the deterioration in the survey evidence suggests the near-term outlook is grim,” said Paul Ashworth, chief North America economist at Capital Economics.
“There are certain parts of the U.S. economy that are being hit harder than others and manufacturing appears to be headed toward a mild recession. The forecast remains for a mild recession to begin in the second quarter of this year,” said Ryan Sweet, chief U.S. economist at Oxford Economics.