Industrial Capacity Use Hits Its Highest Level Since 2000

Output from U.S. factories, mines and utilities rose in December while capacity use climbed, according to a Federal Reserve report Tuesday that stirred anxiety about mounting price pressures.

Industrial production climbed 0.6% last month as energy-related industries recovered from storms that battered the Gulf Coast last summer. Capacity utilization climbed to 80.7%, the highest level in more than five years.

The reading outpaced economists’ expectations of a climb of 0.5% in output and an 80.5% capacity use rate in December.

A separate Fed report on manufacturing in New York indicated strength despite a weaker headline number.

The Fed’s industrial production report indicated that manufacturing output rose 0.2% in December even though motor vehicles and parts production fell 2.8%. Computer and aerospace output both gained.

Utilities’ production climbed 2.7% and output at mines advanced 2.5%.

In the fourth quarter, industrial production increased at an annual rate of 3.8%. December production was 2.8% higher than a year earlier.

As a sign of a manufacturing rebound, the closely watched capacity utilization rose to a level last attained in November 2000. The level, however, is still 0.3 percentage point below its 1972 to 2004 average, the Fed said.

For all of 2005, capacity use was 80%, the highest since 81.8% in 2000.

A New York Fed report indicated that growth at New York state factories slowed in January with a drop in inventories although new orders remained positive.

Investors on Thursday will be watching for more clues about the pace of manufacturing when the Philadelphia Fed releases its factory activity index for January.

Analysts expect that index to rise from a revised December reading issued last week.