Business

US Manufacturing Fell in Q4 Despite Slight December Growth
By Reuters | 16 Jan, 2026

A 0.2% rise in December factory output wasn't enough to prevent a 0.7% drop for the quarter attributable to slumping auto output and worker shortage.

U.S. factory production unexpectedly increased in December amid a surge in primary metals output that offset a decline at motor vehicle assembly plants, but activity contracted in the fourth quarter against the backdrop of challenges from import tariffs.

Manufacturing output rose 0.2% last month after an upwardly revised 0.3% gain in November, the Federal Reserve said on Friday. Economists polled by Reuters had forecast production for the sector, which accounts for 10.1% of the economy, falling 0.2% after a previously reported unchanged reading in November. 

Production at factories increased 2.0% on a year-over-year basis in December. But it dropped at a 0.7% annualized rate in the fourth quarter after growing at a 2.8% pace in the third quarter. Manufacturing has been hurt by President Donald Trump's sweeping import duties, which he has ironically defended as needed to restore a long-declining domestic industrial base. 

Though the levies have shored up industries like primary metals that faced stiff foreign competition, and an artificial intelligence investment boom has supported certain segments, the rest of manufacturing has struggled, with the sector shedding 68,000 jobs in 2025. 

Economists have long argued a manufacturing renaissance was impossible because of structural issues, including worker shortages. They expected some improvement this year as Trump's tax cuts take effect. 

Primary metals production jumped 2.4%. There were also sizeable increases in the output of electrical equipment, appliances and components as well as aerospace and miscellaneous transportation. But motor vehicle production dropped 1.1%, declining for a fourth straight month.  Motor vehicle output fell 2.8% on a year-on-year basis in December.

Mining output fell 0.7% after rebounding 1.7% in the prior month. Frigid temperatures boosted demand for heating, lifting utilities production 2.6%. Utilities output dropped 0.3% in November. Overall industrial production increased 0.4% after a similar gain in November. Industrial output rose 2.0% on a year-over-year basis in December. It grew at a 0.7% rate in the fourth quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)