A worker makes locks at the Pacific Lock factory in Valencia, Calif., in December.Aude Guerrucci/Reuters
U.S. factory production increased by the most in 11 months in January, offering hope for a manufacturing sector that has been squeezed by import tariffs and high interest rates.
Manufacturing output rose 0.6 per cent last month, the largest gain since February, 2025, after being unchanged in December, the Federal Reserve said on Wednesday.
Economists polled by Reuters had forecast production for the sector, which accounts for 10.1 per cent of the economy, would rise 0.4 per cent. Output in December was previously reported to have risen 0.2 per cent.
Production at factories advanced 2.4 per cent on a year-over-year basis in January. Manufacturing has been hobbled by President Donald Trump’s sweeping tariffs, which business leaders say have raised costs for factories and consumers.
Trump has defended his punitive import duties as necessary to restore a long-declining domestic industrial base. The manufacturing sector lost more than 80,000 jobs in 2025. Some segments like technology have thrived amid an artificial spending boom.
Economists are optimistic the boost from AI will broaden to the rest of manufacturing, which they also expect to get a lift from tax cuts.
Canadian manufacturing sales up 0.6 per cent in December, Statistics Canada says
The increase in factory output last month occurred across the board. Durable goods manufacturing output rose 0.8 per cent, with strong gains in nonmetallic mineral products, machinery, computer and electronic products, miscellaneous durable goods, as well as motor vehicles and parts, which rose for the first time since last August.
Non-durable goods manufacturing output rose 0.4 per cent, lifted by gains in the production of paper, printing and support as well as chemicals, plastics and rubber products.
Mining output fell 0.2 per cent after decreasing 0.9 per cent in the prior month. Utilities production increased 2.1 per cent as the tailwind from freezing weather persisted. That reading followed a 3.0 per cent jump in December. Overall industrial production advanced 0.7 per cent after gaining 0.2 per cent in December. Industrial increased 2.3 per cent on a year-over-year basis in January.
Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, increased to 76.2 per cent from 75.7 per cent in December. It is 3.2 percentage points below its 1972–2025 average. The operating rate for the manufacturing sector rose four-tenths of a percentage point to 75.6 per cent. It is 2.6 percentage points below its long-run average.