Fed: Industrial output rose in December

The nation's industrial output posted a solid increase in December as recovery in production of Gulf Coast oil and gas wells offset a slump in auto manufacturing.

The Federal Reserve reported that production at the nation's factories, mines and utilities rose by 0.6 percent last month after gains of 0.8 percent in November and 1 percent in October.

The three strong months represented a recovery in industrial production after a 1.3 percent plunge in September that reflected widespread shutdowns of oil wells, refineries and chemical production after Hurricane Katrina.

For December, manufacturing output edged up a modest 0.2 percent after a 0.4 percent gain in November. The weakness came in production of autos and auto parts, which fell for a third-straight month as automakers continued to scale back output in an effort to reduce the level of unsold cars. The 2.8 percent drop in December followed an even bigger decline of 4.9 percent in November.

That weakness was offset by strength in the production of computers, airplanes and furniture.

Analysts were split on what type of year manufacturers would see in 2006, with some worried about a number of drags on future growth.

"The headwinds of rising interest rates, high energy prices and severe import competition have slowed the manufacturing expansion to only a modest pace of growth. The new year is not expected to change this situation," said Daniel Meckstroth, chief economist for Manufacturers Alliance/MAPI, an industry trade group.

But other economists said factory production will be supported in 2006 by expected strong spending by businesses on new equipment to expand and modernize.

"Record-high profits, combined with solid economic growth and rising capacity utilization will translate into robust capital spending - all good news for the industrial sectors of the economy," said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.