WASHINGTON, Jan 16 (Reuters) - U.S. factory production unexpectedly rose in December, with a surge in primary metals output offsetting a decline at motor vehicle assembly plants. The increase occurred against a backdrop of challenges from import tariffs.
The Federal Reserve reported on Friday that manufacturing output increased 0.2% last month, following an upwardly revised 0.3% gain in November. Economists surveyed by Reuters had predicted a 0.2% decrease for the sector, which represents 10.1% of the economy, after a previously reported unchanged reading for November.
On a year-over-year basis, factory production grew 2.0% in December. However, it contracted at a 0.7% annualized rate in the fourth quarter, following a 2.8% pace of growth in the third quarter. Manufacturing has been impacted by President Donald Trump's broad import duties, which he has defended as necessary to restore a long-declining domestic industrial base.
While the tariffs have supported industries like primary metals that faced intense foreign competition, and an artificial intelligence investment boom has aided certain segments, other parts of manufacturing have struggled. The sector lost 68,000 jobs in 2025.
Economists have contended that a manufacturing revival is unlikely due to structural issues, including worker shortages. They anticipated some improvement this year as Trump's tax cuts take effect.
Primary metals production surged 2.4%. Significant increases were also recorded in the output of electrical equipment, appliances, and components, as well as aerospace and miscellaneous transportation. Motor vehicle production, however, fell 1.1%, marking a fourth consecutive monthly decline. On a year-on-year basis, motor vehicle output dropped 2.8% in December.
Mining output decreased 0.7% after rebounding 1.7% in the previous month. Cold weather increased demand for heating, boosting utilities production by 2.6%. Utilities output had declined 0.3% in November. Overall industrial production rose 0.4% after a similar gain in November. Industrial output increased 2.0% year-over-year in December and grew at a 0.7% rate in the fourth quarter.