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Factory Output Cools After Biggest Gain Since February
Factory production cooled in December as capital spending and vehicle assemblies slowed, indicating U.S. manufacturers were adjusting to weaker overseas markets.
The 0.3% increase in output followed a 1.3% November gain that was the strongest since February, data from the Federal Reserve showed Jan. 16. Total industrial production fell 0.1% as utility use slumped.
Manufacturing growth is slowing to a more sustainable pace as factories take in fewer orders for business equipment and global economies struggle for traction. At the same time, production probably will be underpinned by steady U.S. demand as employment and cheap fuel help power consumer spending.
"As the rest of the world slows and serves as a drag, our own domestic demand should be picking up," Raymond Stone, managing director at Stone & McCarthy Research Associates, said before the report. "It's not jump-for-joy good, but I think we're moving in the right direction."
Manufacturing output, which accounts for about 12% of the economy, was projected to rise 0.2% last month after a previously reported 1.1% surge, according to the Bloomberg News survey median. Total industrial production was forecast to fall 0.1%.
Capacity utilization, which measures the amount of a plant that is in use, eased to 79.7% in December from 80% the prior month, which was the highest since March 2008.
Utility output plunged 7.3%, the most since January 2006, after a 4.2% gain the previous month, the Fed said. Americans adjusted their thermostats as temperatures climbed. Last month was the second-warmest December in records dating to 1939, according to the National Climatic Data Center.
Mining production, including oil drilling, increased 2.2% in December, the most since March 2011, after a 0.3% drop. Oil- and gas-well drilling decreased 1.9%, the biggest decline since August 2012, after a 0.5% decrease a month earlier.
Factory output of consumer goods fell 1.1% in December after rising 2.5%. Business equipment production increased 0.1% after a 1.4% jump. Machinery production and wood products output also dropped.
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Intermodal Traffic Rises 2.1% for Week
U.S. rail intermodal traffic increased 2.1% in the week ended Jan. 10 compared with the same week last year, the Association of American Railroads reported.
Railroads moved 276,573 intermodal trailers and containers, AAR said Jan. 15 in its weekly report.
Rail carload volume, which excludes intermodal units, increased 4.9% year-over-year to 517,520 carloads.
Eight of the 10 commodity groups AAR tracks increased over last year, led by coal at 4.2%.
Intermodal volume for all of North America increased 4.3% to 306,852 trailers and containers.
Canadian railroads moved 56.125 intermodal units, a 16.1% increase. Mexican rail moved 9,780 units, a 0.5% rise from the same time last year.
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Oil Resumes Decline, One Day After Surge
West Texas Intermediate oil fell for the fourth time in five days as OPEC said it expects weaker demand for its crude, and U.S. output climbed to the highest in records dating to January 1983.
Demand for oil from the Organization of Petroleum Exporting Countries will average 28.8 million barrels a day, about 100,000 barrels less than forecast last month, the Vienna-based organization said in a monthly report. U.S. output surged to 9.19 million barrels a day last week, the Energy Information Administration reported Jan. 14.
Crude slid almost 50% last year, the most since the 2008 financial crisis, as OPEC resisted calls to cut its output ceiling amid the U.S. shale boom, exacerbating a global surplus. WTI crude will decline to $32 by the end of this quarter, Bank of America said.
"Nothing fundamental has changed," said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. "It's going to take months before you see U.S. production slowing down."
WTI for February delivery fell 51 cents, or 1.%, to $47.97 a barrel at 11:51 a.m. on the New York Mercantile Exchange after climbing to $51.27. The contract advanced 5.6% on Jan. 14, the most since June 2012. The volume of all futures traded was more than twice the 100-day average for the time of day.
Brent for February settlement, which expires Jan. 15, fell 12 cents to $48.57 a barrel on the London-based ICE Futures Europe exchange. The more active March futures slid 7 cents to $49.79. Brent traded 60 cents above WTI on the ICE.
"When the market extends itself too far, we'll see some short-covering rally, and when the pressure evaporates, we'll continue to see prices moving lower," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. "That's what we are witnessing now."
U.S. crude production increased by 60,000 barrels a day in the week ended Jan. 9, EIA reported Jan. 14. Stockpiles expanded by 5.39 million barrels to 387.8 million, more than 9% above the five-year average for this time of year, according to the Energy Department's statistical arm.
"The market is oversupplied," said Michael Hiley, head of energy OTC at LPS Partners Inc. in New York. "U.S. production will continue to edge higher. The market is not acting like it's done going down."
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