Industrial Production in January Takes a 1.2% Drop

Industrial production slipped 1.2% in January, the government said today, as abnormally warm weather reduced utility use and auto makers temporarily laid off workers to reduce bloated inventories.

The Federal Reserve said January’s decline followed a revised 0.2% gain in output a month earlier as a major strike ended at the Boeing Co. and utilities fired up their operations to meet the demand prompted by the fourth-coldest December on record. December’s increase originally was reported to be 0.4%.

January’s decline was the first dip in production since a 0.3% drop in October.

“In January, the output of motor vehicles was curtailed drastically, and the extremely warm weather caused a sharp drop in utilities’ output,” the department said.

Output at utilities fell 10.7% last month, the warmest January in 96 years of government weather record-keeping, reversing a huge 6.3% advance in December.

And the layoffs at auto factories drove overall manufacturing production down 0.9%. Manufacturing output represents 84% of the index.

“Automobile assemblies plunged to a 4.1-million-unit annual rate from a 6.2-million-unit rate in December,” the department said.

The interest-sensitive manufacturing sector has been among the hardest hit by Federal Reserve efforts to restrain inflation by keeping a tight grip on credit.

Production of durable goods--big-ticket items expected to last more than three years--fell 1.7% after rising 0.3% in December and 0.4% in November.

Non-durable goods production increased 0.2%, reversing a 0.2% decline in December.

In another report, the Fed said the operating rate of the nation’s factories, mines and utilities dipped 1.2 percentage points to 81.9% in January.

Factory use had remained steady at a revised 83.1% in December, largely because of the weather-related 5 percentage point hike to 86.4% in the utility rate.

The factory-use rate was 83.1% in both October and November.

Analysts generally consider an operating rate of 85% or above as an indication of inflationary pressures.