Industrial production up 0.6% in November as mining and utilities gains offset manufacturing decline

Getty ImagesA worker installs parts in a Mercedes-Benz C-Class frame as they move down the production line at a factory in Alabama.

The numbers: Industrial production rose 0.6% in November, the strongest gain in three months, the Federal Reserve reported Friday, on the back of strong mining and utility output.

The increase in November output was above Wall Street expectations of a 0.4% increase. Compared with 12 months earlier, production was up 3.9%.

But manufacturing output was weak for the second straight month. During November, manufacturing output was flat and there was a large downward revision in the prior month, to a fall of 0.1% from a gain of 0.3%.

What happened: As expected, the gain in overall production was led by a 3.3% jump in utility output as cold weather swept across the country. In addition, mining output rose 1.7%. This index, which includes oil production, is 13.2% above its level of a year earlier.

Within manufacturing, durable goods output rose 0.2% but this was offset by weakness in nondurables and publishing and logging.

Auto manufacturing rose a slight 0.3% in November after a 3.1% decline in the prior month. Excluding autos, manufacturing was down 0.1%.

Capacity utilization rose 0.4 percentage point in November to 78.5%. This is still below the level, around 80%, that is likely to put pressure on costs.

Big picture: Manufacturing may be starting to feel the effects of the weaker global economic outlook and the stronger dollar DXY, +0.34% . Trade policy is also a significant uncertainty.

What they are saying: "In short, the U.S. is now a tale of two economies. Consumer-facing sectors are doing very well, thanks first to the tax cuts and now the drop in gas price, while the industrial sector is struggling," said Ian Shepherdson, chief economist Pantheon Macroeconomics.

Market reaction: The Dow Jones Industrial AverageDJIA, -2.02% opened more than 200 points lower in reaction to weak economic data from China.

Also see: Retail sales get off to good start for the holiday season on strong online demand