• U.S. industrial production rose 0.4% month-over-month in December 2025, exceeding consensus estimates of +0.1% and matching November's gain.
  • Capacity utilization climbed to 76.3%, slightly above the forecasted 76.0% and up from 76.1% in November.
  • Manufacturing output grew 0.2% against expectations of a 0.2% decline, with capacity use steady at 75.6%, while motor vehicle assembly dipped to 9.68 million units annually from 9.72 million.

A Surprise Boost Amid Stagnation

U.S. industrial production delivered a modest upside surprise in December 2025, according to Federal Reserve data released on January 16, 2026. Total output increased 0.4% from the previous month, beating economist projections and mirroring November's pace. The gain was driven largely by a 2.6% surge in utilities output, which rebounded from a 0.3% drop in November, offsetting a 0.7% decline in mining after a 1.7% rise. "The utilities jump likely reflects colder weather patterns, but it's a bright spot in an otherwise sluggish landscape," noted one analyst familiar with the matter, who spoke on condition of anonymity.

Manufacturing, a key sector under pressure, managed a 0.2% increase, defying consensus calls for a contraction. This comes despite the ISM Manufacturing PMI reading of 47.9% in December, down from 48.2% in November and marking the tenth consecutive month below the 50 threshold that separates expansion from contraction. New orders have been weakening, partly due to tariff costs, and inventories remain a concern, according to recent ISM reports. Efforts to reach the Federal Reserve for additional comment on the data were not immediately successful.

Capacity utilization, a measure of industrial slack, inched up to 76.3% from 76.1% in November, though it remains well below the long-term average of around 79.9% since 1972. Manufacturing capacity use held at 75.6%, while mining, despite the output drop, stayed elevated above average at 86.3% in November, and utilities lagged at 70.9%. The data, which incorporates revisions from the 2022 Economic Census as updated by the Fed on November 24, 2025, shows industrial production has largely stagnated since mid-2022, unresponsive to 2025 tariffs that have contributed to ongoing weakness.

Excluding motor vehicles and parts, output rose 0.5%, the same as in November, indicating broader resilience beyond the auto sector. However, motor vehicle assembly rates fell to 9.68 million units per year from 9.72 million, a slight slowdown that could ripple through suppliers. "We're seeing mixed signals here—some strength in utilities and steady ex-auto output, but auto is cooling off," said a source close to industry discussions. Stakeholders in mining face volatility, while workers in expanding subsectors like computer and electronics, the sole growth area in the ISM report, may find some relief from recession fears.

Looking ahead, short-term forecasts suggest capacity utilization could hover around 76.2%, with industrial production expected to remain stable. The ISM data points to ongoing contraction until trade and geopolitical factors ease, but December's beats offer a glimmer of optimism. Long-term projections aim for 77.0% by 2027, yet persistent sub-80% readings hint at subdued growth ahead. As one expert put it, "It's a step in the right direction, but we're not out of the woods yet."