Winter Utility Use Sparks .4% Hike in Industrial Production

Industrial production rose 0.4% in December, the second consecutive monthly gain, as unseasonably cold weather fired up output by utilities, the government said today.

Despite the 6.3% gain in utilities, manufacturing production remained sluggish, also partly because of the weather. The slow pace was reflected by the loss of 25,000 factory jobs and an unchanged 40.7-hour average work week.

The manufacturing sector, particularly in durable goods--items such as cars and household appliances expected to last more than three years--has been affected by the Federal Reserve Board’s tight rein on credit designed to curtail inflation because many such items are financed by loans.

In its report today, the board said December’s gain in production followed a revised 0.3% advance in November, up from the 0.1% reported initially. Output had declined 0.4% in October and 0.1% in September.

“The extremely cold weather in December caused a sharp rise in utility output but also resulted in some production disruptions, particularly in petroleum refining and construction supplies,” the Fed said.

“Aircraft production returned to normal in December following the settlement of a strike” at the Boeing Co., it said.

In another report, the central bank said the operating rate at the nation’s factories, mines and utilities rose 0.2 percentage point to 83.3% in December, reflecting the increase in the production rate. The operating rate measures both output and changes in productivity levels.

The operating report is watched as a barometer of future inflation. The closer U.S. industry gets to full operating capacity, the greater difficulty it has producing enough to meet demand, leading to shortages and price increases.