* Industrial production increases 0.9 percent in December
* Manufacturing output gains 0.1 percent
* Utilities production rises 5.6 percent; mining up 1.6 percent
WASHINGTON, Jan 17 (Reuters) - U.S. industrial production increased more than expected in December as unseasonably cold weather at the end of the month boosted demand for heating, but manufacturing output barely rose, pointing to moderate growth in the industrial sector.
Strong demand for utilities bolsters expectations of an acceleration in consumer spending in the fourth quarter, which could prompt analysts to raise their economic growth estimates for the October-December period.
The Federal Reserve said on Wednesday industrial output surged 0.9 percent last month also buoyed by robust gains in mining production after slipping 0.1 percent in November.
Economists polled by Reuters had forecast industrial production advancing 0.4 percent in December. Industrial production rose at an annual rate of 8.2 percent in the fourth quarter, the biggest gain since the second quarter of 2010.
For all of 2017, industrial output rose 1.8 percent, the first and largest increase since 2014.
The industrial sector is being supported by a strengthening global economy and a weakening dollar, which is helping to make U.S. exports more competitive relative to those of the nation's main trading partners. A survey early this month showed an acceleration in factory activity in December, with a measure of new orders recording its best reading since January 2004.
The dollar maintained gains versus a basket of currencies after the data, while prices for U.S. Treasuries were little changed.
Mining production increased 1.6 percent in December amid a rebound in oil and gas well drilling. Utilities production accelerated 5.6 percent last month after declining 3.1 percent in November.
Bitter cold gripped a large part of the country at the end of December. The surge in utilities demand added to strong December retail sales in supporting expectations of an acceleration in consumer spending in the fourth quarter.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.2 percent annualized rate in the third quarter.
But manufacturing output gained only 0.1 percent in December, putting a wrinkle on the report, after rising 0.3 percent in the prior month. Manufacturing production jumped 1.5 percent in October.
Manufacturing output was last month held back by a 1.5 percent drop in the production of primary metals. Motor vehicle and parts production increased 2.0 percent. Manufacturing production rose at a 7.0 percent rate in the fourth quarter.
With output accelerating last month, capacity utilization, a measure of how fully industries are deploying their resources, increased to 77.9 percent, the highest since February 2015, from 77.2 percent in November.
Capacity utilization is 2 percentage points below its long-run average. Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)