U.S. factory output up in December

U.S. factory output surged in December by the most in a year. Stronger demand for business equipment, vehicles and energy offered the most visible evidence that manufacturing has roared back from the depths of the recession.

The Federal Reserve said that manufacturing increased 0.9 percent in December, the biggest gain since December 2010. And the overall output of the nation’s factories, mines and utilities grew 0.4 percent in December. Warm weather dampened demand for energy produced by utilities.

Industrial output is less than five percent below its pre-recession peak reached in September 2007. It has increased more than 14 percent since hitting a recession low in June 2009.

Manufacturing activity remains nearly eight percent below its pre-recession peak in July 2007; yet it has increased almost 15 percent from its recession low. The recession hit manufacturing harder than the overall industry, so its path to recovery has been a little slower.

Factories benefited in the second half of 2011 from a number of trends. Consumers bought more cars; businesses boosted spending on industrial machinery and computers; and companies are restocking their warehouses again after cutting inventories over the summer.

Still, Europe’s debt crisis has already started to dampen demand for American exports. That could slow manufacturing and threaten growth in 2012.

In December, factories made more goods that are used early in the production process – construction materials, metals and wood products. That typically signals that production of finished products will increase in the coming months.

Other reports showed manufacturing is picking up. New orders rose and production increased last month, according to a private survey by the Institute for Supply Management. The government said factories hired a net 23,000 workers – the best job growth for the sector since July. In addition, U.S. automakers said November and December were the best sales months in 2011.