U.S. industrial output fell 0.2 percent in January as warm weather slashed power usage, Federal Reserve data showed on Wednesday, but higher manufacturing production and strong capacity use fanned inflation fears.
Shortly after the report was released, new Fed Chairman Ben Bernanke told Congress that the U.S. economy was running so close to capacity that it faced increasing inflation risks that could require higher interest rates to tamp down.
The Fed said utility output fell 10.1 percent in January, the largest monthly decline in the 34-year history of the Fed's industrial production index.
But excluding output from utilities, January output from U.S. factories and mines would have been 0.8 percent higher, the Fed said...
While the weather-related fall in utility output caused closely watched industrial capacity utilization to dip to 80.9 percent, it still topped economists' forecasts for 80.8 percent utilization. December's capacity use rate was revised to 81.2 percent from a previously reported 80.7 percent.
And manufacturing capacity use was 80.5 percent in January, the highest level since July 2000...
A separate index report from the New York Federal Reserve indicated that manufacturing growth at New York state factories ticked higher in February, exceeding expectations, but the employment component of the index dropped.
The weather will be a factor for oil prices too. From Bloomberg:
Crude oil rose for the first day in four in New York after falling below $58 for the first time this year when a government report showed U.S. oil stockpiles jumped almost five times as much as analysts had expected.
Crude-oil supplies climbed 4.9 million barrels to 325.6 million last week, the highest since June, the Energy Department said yesterday. Oil fell as low as $57.60 a barrel, erasing gains that started late December on concern Iran may cut oil exports in the dispute over its nuclear program.
Outside the US, Japan's leading index has been revised up from a preliminary 80.0 percent to 81.8 percent.