Industrial output expanded largely on utilities

February 14, 2025

Industrial production grew 0.5% in January after December and November data were revised lower. Production hit the highest level since September 2022, beating expectations. Compared to a year ago, industrial production is up 2%, the largest jump in more than two years.

Below-average temperatures in much of the South and Midwest in January spurred increased energy usage; record-breaking cold and snow hit the Gulf Coast. The index for energy materials hit the highest level on record going back to the 1950s.

Utilities production jumped 7.2% last month, the largest increase since March 2017. It is not just cold weather effects. Energy needs by businesses are increasing, especially as businesses pivot to adopt generative AI.

Mining production fell 1.2% in January but was still 3.4% higher than a year ago. Oil and gas extraction, along with coal mining, fell while metal ore mining gained. Gold prices keep hitting new records.

Drilling oil and gas wells fell to the lowest level since September 2021. A ban on liquified natural gas exports made by the former administration exactly one year ago was lifted by the new administration on Inauguration Day. Natural gas liquid extraction fell in the month, but the overall trend has been growing for decades.

Manufacturing output slumped 0.1% in January as both durable and nondurable goods production underperformed. Vehicle production fell to the lowest level in three years while computers and electronics production helped offset some of that drop. A resumption of work at a major aerospace producer in November took two months to show up in aerospace transportation production data, which reached the highest level since August 2024. Food manufacturing was lower, which showed up in higher food inflation readings in January; the bird flu has been wreaking havoc on egg prices. Higher-for-longer mortgage rates have frozen the housing market and as a consequence, demand for furniture and appliances. Furniture manufacturing remains near the lows last seen in the early 1980s (excluding Covid-era plant shutdowns), when mortgage rates were in the double digits.

Capacity utilization rose 1.2% due entirely to utilities. Manufacturing and mining both declined.