By Lucia Mutikani
WASHINGTON (Reuters) - U.S. manufacturing output recorded its largest increase in nine months in November as production expanded across the board, pointing to underlying strength in the economy.
Factory production rose 1.1 percent after advancing 0.4 percent in October, the Federal Reserve said on Monday.
"There is little evidence here that weaker global growth or a stronger dollar has hurt U.S. manufacturing," said John Ryding, chief economist at RDQ Economics in New York.
The upbeat factory data joined bullish employment and retail sales reports in suggesting strength in the economy, even as growth in the fourth quarter is expected to moderate sharply after two back-to-back quarters of robust expansion.
Wall Street had expected manufacturing output to rise only 0.5 percent in November. The U.S. remains a bright spot in a troubled global economy, where growth has slowed in China and the euro zone. Japan has slipped back into recession.
But optimism over U.S. manufacturing was tempered somewhat by a New York Federal Reserve report showing its Empire State general business conditions index contracted in December for the first time since January 2013.
Economists, however, cautioned against reading too much into the weak report, noting the survey was volatile because of limited factory activity in New York state.
"With all the discussion about the impact of lower oil prices, it may feel like this miss is a warning that the factory sector is retrenching," said Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, North Carolina.
"We are not convinced is what the numbers are telling us."
A third report showed homebuilder sentiment ebbed in December, though builders remained more optimistic than in the first half of the year.
The reports came a day before Federal Reserve officials gather for a two-day meeting to assess the economy's health and deliberate on monetary policy.
Economists expect the U.S. central bank to open the door a bit wider to interest rate hikes next year after the recent run of bullish data.
U.S. financial markets were little moved by the mixed data as investors kept a wary eye on oil prices, which hit fresh 5-1/2 year lows.
Manufacturing output in November was led by a 5.1 percent jump in automobile production after three straight months of decline. There were also solid gains in machinery, apparel and leather, and petroleum and coal products.
Mining output slipped 0.1 percent. Utilities production jumped 5.1 percent as a cold snap boosted demand for utilities, prompting forecasting firm Macroeconomic Advisers to raise its fourth-quarter growth estimate by one-tenth of a percentage point to a 2.6 percent annual rate.
Strong manufacturing and utilities output combined to lift overall industrial production by 1.3 percent in November, the largest increase since May 2010.
The amount of manufacturing capacity in use last month rose to its highest since December 2007. Overall industrial capacity use hit its highest level in more than 6-1/2 years.
"This could be seen as an indication of accelerating resource slack absorption in the U.S. economy," said Millan Mulraine, deputy chief economist at TD Securities in New York.
Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to run before it becomes inflationary.
(Reporting by Lucia Mutikani; Additional reporting by Rodrigo Campos and David Gaffen in New York; Editing by Andrea Ricci and Meredith Mazzilli)