By Harriet Torry 

WASHINGTON -- Consumer spending in the U.S. picked up slightly in January after a weak holiday season, while manufacturing started the year on a decline, suggesting forces that slowed 2019 growth continued at the start of this year.

Government and survey data released Friday showed consumers remained upbeat, but the manufacturing industry was struggling. "There seems to be this ongoing dichotomy between business and the consumer sector," said Gregory Daco, an economist at Oxford Economics.

Businesses reined in investment in three out of four quarters in 2019, and remained constrained by weak global growth, trade tensions -- and now China's coronavirus outbreak that threatens to upend global supply chains.

Industrial production, a measure of factory, mining and utility output, decreased a seasonally adjusted 0.3% in January from the prior month, the Federal Reserve said Friday. Utilities production dropped 4% last month, as Americans cut back on energy consumption during a warmer-than-usual January.

The halt in production of Boeing Co.'s 737 MAX airplane, which started in January, led to a 7.4% decrease in the aerospace industry's production last month. Economists expect Boeing's troubles to affect first-quarter U.S. economic growth, along with economic ripples from the coronavirus.

Consumers in the U.S. remained upbeat however. A University of Michigan survey released Friday said the index of consumer sentiment increased to 100.9 this month from 99.8 at the end of January, close to the post-recession peak of 101.4 set in March 2018. The coronavirus was mentioned by just 7% of respondents when asked about their economic expectations in early February.

Consumers are spending, too, after a weak holiday season. Retail sales, a measure of purchases at stores, at restaurants and online, increased a seasonally adjusted 0.3% in January from a month earlier, the Commerce Department said Friday. That was the strongest pace of growth since October, after December's holiday retail sales were revised down slightly, to a 0.2% rise.

January was the fifth warmest for the month on record for the U.S., according to the National Oceanic and Atmospheric Administration.

Mild winter weather was a boon to consumer spending in certain categories, such as home-improvement stores, restaurants and bars. But it hurt spending in other categories, such as apparel, as consumers held off on purchases of winter coats and boots. Clothing sales dropped 3.1% from December, the largest month-over-month decrease in that category since March 2009.

"Once you incorporate the utility effect, the [weather] impact has probably been marginally negative" on overall consumer spending, said Stephen Stanley, chief economist at Amherst Pierpont.

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output. It rose at a weak 1.8% annual rate in the fourth quarter of 2019, down from a 3.2% rate in the third quarter, and Friday's report offered few signs that the pace of household outlays picked up meaningfully in the first month of 2020.

Still, factors driving U.S. consumer spending remain positive. Unemployment was a low 3.6% in January, and average hourly earnings posted a 3.1% year-over-year gain, suggesting households have money to spend.

"The economy is on stable ground," payroll-processing company Automatic Data Processing Inc.'s Chief Executive Carlos Rodriguez said during an earnings call on Jan. 29. Wage growth is "still at robust levels and should drive continued consumer spending and continued consumer confidence," he said.

Some retailers are circumspect about the prospects for 2020. Macy's CEO Jeff Gennette said last week that while the economy is still healthy, he is mindful "that it's not going to be as strong as it was in the two previous years." U.S. gross domestic product -- the value of all goods and services produced across the economy -- grew 2.3% in 2019, slower than 2.9% in 2018.

On Jan. 15, the U.S. and China signed a trade deal in which the U.S. agreed to cut tariffs on $120 billion in Chinese goods by half, to 7.5%, and to forgo other planned tariffs. But the deal leaves in place U.S. tariffs on about $370 billion in Chinese goods, or about three-quarters of Chinese imports to the U.S.

January also saw the first confirmed cases of coronavirus in the U.S., and in late January the U.S. imposed entry restrictions on foreign nationals and quarantines on Americans returning from the Chinese province at the center of the outbreak. While the number of coronavirus cases in the U.S. remains small, the reverberations of the outbreak have hit certain sectors, such as the U.S. tourism industry, and disrupted some U.S. retailers' operations overseas.

Ralph Lauren Corp. temporarily closed around two-thirds of its mainland China stores over the past week due to coronavirus. The fashion house said Thursday it would take a hit in its current quarter of $55 million to $70 million in sales, and $35 million to $45 million in operating income in Asia, due to the outbreak.

"The company also expects broader impact across its businesses in China and parts of Asia due to significantly reduced travel and retail traffic, " Ralph Lauren said.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

February 14, 2020 14:22 ET (19:22 GMT)