WASHINGTON (Reuters) - Industrial output rose by more than expected in September, posting a sharp rebound from a downwardly revised drop the previous month, which had been held back because of hurricane impact on oil and gas production in the Gulf of Mexico.

Industrial production rose by 0.4 percent, the Federal Reserve said on Tuesday. Analysts polled by Reuters had forecast a 0.2 percent rise compared to a 1.4 percent decline in August. This was initially reported as a 1.2 percent drop.

Industrial production encompasses output from factories, utilities and mining operations, including oil and natural gas production.

Manufacturing output rose by 0.2 percent, utilities output was up 1.5 percent and mining output advanced 0.9 percent in September.

Capacity utilization, a measure of how fully firms are using their resources, was at 78.3 percent in September, matching forecasts, and was slightly higher than the 78.0 percent rate in August. This was previously estimated at 78.2 percent.

(Reporting By Alister Bull; Editing by Chizu Nomiyama)