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US industrial production drops in January as cold weather freezes output

U.S. manufacturing output unexpectedly fell in January and recorded its biggest drop since 2009 as cold weather disrupted production, the latest indication the economy got off to weak start this year.

Factory production fell 0.8 percent last month, the largest decline since May 2009, the Federal Reserve said on Friday. Output had increased 0.3 percent in December.

The Fed attributed the first decline in factory output to "severe weather that curtailed production in some parts of the country."

Manufacturing joined retail sales and employment in suggesting a step-back in growth early in the first quarter as cold weather takes its toll.

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The drop in factory output and a 0.9 percent fall in mining weighed on overall production, which fell 0.3 percent in January, the biggest drop since April.

Production at the nation's mines, factories and power plants had increased 0.3 percent in December.

But freezing temperatures boosted demand for heating last month, causing utilities production to jump 4.1 percent.

Economists polled by Reuters had expected manufacturing output to edge up 0.1 percent and industrial production to rise 0.3 percent last month.

Last month, the amount of industrial capacity in use fell to 78.5 percent from 78.9 percent in the prior month.

Industrial capacity utilization, a measure of how fully firms are using their resources, was 1.6 percentage points below its long-run average.

Officials at the Fed tend to look at utilization measures as a signal of how much "slack" remains in the economy, and how much room growth has to run before it becomes inflationary.

--By Reuters

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