Production at U.S. factories rebounded in January, but output in the prior month was much weaker than initially thought amid higher borrowing costs that are hurting the manufacturing sector.
Manufacturing output increased 1.0% last month, the Federal Reserve said on Wednesday. Data for December was revised down to show production at factories declining 1.8% instead of the previously reported 1.3%. Economists polled by Reuters had forecast factory production would increase 0.8%.
Output gained 0.3% on a year-on-year basis in January. Manufacturing, which accounts for 11.3% of the U.S. economy, has seen demand for goods, usually bought on credit, undercut by higher interest rates. The Institute for Supply Management's measure of national factory activity has contracted for three straight months. The Fed has raised its policy rate by 450 basis points since last March from near zero to a 4.50%-4.75% range, with the bulk of the increases coming between May and December. Two additional rate hikes of 25 basis points are expected in March and May.
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