Key manufacturing indicators posted modest gains in December, but there is still room for improvement in capacity utilization and other areas.
According to a statistical release from the Federal Reserve, industrial production increased 0.4% in December and grew at an annual rate of 0.7% in the fourth quarter. Manufacturing output rose 0.2% in December, but declined at an annual rate of 0.7% in the fourth quarter. In addition, capacity utilization stepped up to 76.3%, which is 3.2% below its 1972–2024 average.
“The Federal Reserve’s latest manufacturing data show modest growth in output and a small bump in capacity utilization,” Kim Humphrey, president and CEO of the Association for Manufacturing Excellence, said in an email. “This is good news for the people who keep U.S. manufacturing running. It suggests a bit more stability on the shop floor and more predictable production schedules for teams.”
However, she said capacity utilization is still below long-term averages and “many manufacturers have room to grow.”
“The recent improvement likely reflects investments in people, safer and more efficient processes, and smart use of technology,” Humphreys said. “While it’s too soon to call this a lasting trend, continued progress will depend on people-centered leadership, ongoing skills development, and a commitment to continuous improvement.”
Underscoring the notion that there is still plenty of room for growth despite slight upticks in key metrics, U.S. manufacturing activity dropped to the lowest point of 2025 in December, according to the Institute for Supply Management’s latest Purchasing Managers’ Index.
Additional statistics
The Federal Reserve said that most of the major market groups posted gains in December, and all of the major market group indexes ended the year above their year-earlier levels. In particular:
- The output of consumer goods increased 0.7%, as a 1.1% rise in nondurables production outweighed a 0.7% decline in durables production.
- The index for business equipment grew 0.8%, supported by increases in the indexes for transit and for industrial and other equipment.
- Construction supplies posted a decline of 0.3%, while the index for business supplies was flat.
As for industry groups, the durable manufacturing index edged up 0.1%, with large contributions from growth in the output of primary metals (2.4%), electrical equipment, appliances, and components (1.7%); and aerospace and miscellaneous transportation equipment (1.5%). In addition:
- Wood products, nonmetallic mineral products, and motor vehicles and parts all posted declines of at least 1%.
- The nondurable manufacturing index increased 0.3%, with increases for food, beverage, and tobacco products, petroleum and coal products, and plastics and rubber products offsetting decreases in the other nondurable manufacturing indexes.
- The output of durables was 3.1% above its year-earlier level, and the output of nondurables was 1% above its year-earlier level.
The operating rate for mining decreased by 0.5 percentage points to 85.7%, and the operating rate for utilities moved up 1.6 percentage points to 72.3%. The rate for mining was 0.5% percentage point above its long-run average, while the rate for utilities remained substantially below its long-run average.
