Industrial Production Jumps 0.8 Percent

WASHINGTON – Big industry production rebounded in January, rising by a strong 0.8 percent, an encouraging sign that the industrial sector's recovery is on track.

The increase in output at the nation's factories, mines and utilities came after industrial production was flat in December, the Federal Reserve (search) reported Tuesday. While unhappy about that, economists were still hopeful that the lackluster performance seen in December was a temporary rough patch and that activity would bounce back in January.

The pickup in industrial production last month matched analysts' expectations and marked the biggest increase since November.

For all of 2003, industrial activity rose by 0.2 percent, a big improvement from the 0.6 percent decline registered in 2002. Last year marked the first year that industrial production was in positive territory since 2000, when the economy was still enjoying a record economic expansion.

Manufacturing, which bore the brunt of the 2001 recession, has had an uneven journey since then in its quest to get back on solid ground. Manufacturers have not only had to cope with difficult economic times at home and abroad but also have had to compete with a massive flow of imported goods coming into the country.

A weaker U.S. dollar, however, has been helping U.S. exports. The weaker dollar makes U.S. goods less expensive and thus more competitive in overseas markets.

Tuesday's report, along with other recent economic data on manufacturing, suggest that the sector is slowly getting stronger. .

Even so, the sector's employment picture is still troubled. Factories have cut 3 million jobs since July 2000, the month that employment in manufacturing peaked, and the economy was still in an expansion mode. Productivity gains (search) have allowed factories to produce more while keeping work forces lean, a factor in the industry's job losses.

In January, production at factories — the biggest slice of industrial output tracked by the Fed — rose by a modest 0.3 percent, an improvement from December's 0.1 percent rise.

Gains were relatively widespread last month, with production rising for automotive products, appliances, furniture and carpeting, business equipment and machinery.

Production at gas and electric utilities jumped by 5.2 percent in January as unusually cold weather increased demand. That compared with a 1.3 percent drop in December.

Output at mines nudged up 0.1 percent in January, following a 0.2 percent increase.

The Federal Reserve decided to hold a main short-term interest rate at a 45-year low of 1 percent in January and said it would be patient when it came to any possible rate increases. Some economists believe the Fed will nudge up rates later this year. Others believe rates won't go up until 2005.