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Auto factories slow down

Statistics reflect momentary stall after hot sales year

– U.S. factories slowed production in January after two solid months of cranking out goods. The weakness mainly reflected a big drop in output at auto factories that is likely temporary.

Manufacturing output fell 0.4 percent in January from December, the Federal Reserve said Friday. The decline followed increases of 1.1 percent in December and 1.7 percent in November.

Overall industrial production edged down 0.1 percent in January compared with December. Output in mining, the category that covers oil and gas drilling, fell 1 percent. Utility output jumped 3.5 percent, as a cold snap led more households to turn up their heat.

Factory output, the most important component of industrial production, was dragged lower by a steep 3.2 percent decline in auto and auto parts production. The auto industry is coming off its best year for sales in five years, one of the few bright spots in an otherwise bleak manufacturing sector. Sales continue to rise, so February data will likely reflect a rebound in production.

Still, many factories outside the auto industry have been hurt by a slowdown in consumer spending and weaker global growth that has dampened demand for U.S. exports.

Economists expect healthier output in 2013, partly because U.S. companies are sitting on large amounts of cash and appear poised to invest some of it in equipment and machinery. Economies in Europe are also healing, and growth in Asia is expected to improve.

“Global growth will still be fairly weak this year, which will prevent industry from firing on all cylinders. But there’s no denying that industrial conditions have recently improved,” said Paul Dales, senior U.S. economist at Capital Economics.

A second report Friday showed that manufacturing activity in the New York area posted a big gain in February.

The New York Federal Reserve’s Empire State survey rose to 10.04 in February, compared with a negative 7.78 in January. It was the biggest one-month improvement in this index in more than two years.

And a closely watched survey released earlier this month suggests overall manufacturing conditions are improving. Manufacturing activity grew last month at the fastest pace since April, according to the Institute for Supply Management.

Factories saw growth in new orders, hired more workers and boosted their stockpiles after two months of declines, the survey noted.

Economists at Barclays Capital estimate the economy expanded at a 0.5 percent rate in the fourth quarter. And that growth will likely pick up in the January-March quarter to an annual rate of 1.5 percent, analysts forecast.

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