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U.S. Industrial Production Was Little Changed in February

Industrial production in the U.S. was little changed in February, restrained by a slowdown in manufacturing and a decline in natural gas extraction.

The output last month at factories, mines and utilities compared with a median projection for a 0.4 percent gain in a Bloomberg News survey of economists. Production in January was revised to a 0.4 percent increase, initially reported as no change, data from the Federal Reserve showed today in Washington. Manufacturing (IPMGCHNG), which makes up about 75 percent of total output, rose at the slowest pace in three months.

Higher energy costs, smaller inventory rebuilding and slower demand for U.S. exports may be tempering production. At the same time, stronger retail sales and corporate investment in new equipment will probably sustain growth in the industry at the forefront of the expansion.

“The trend for manufacturing has been good but not great,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who projected a 0.1 percent rise in industrial production. “Slowing in certain parts of the world -- Europe and China -- will have an impact, and the lift from inventories is fading.”

Auto production cooled in February after surging a month earlier, while the output of consumer goods was little changed, today’s report showed. Manufacturing accounts for about 12 percent of the U.S. economy.

Estimates of the 81 economists surveyed by Bloomberg ranged from gains of 0.1 percent to 1 percent.

Stocks were little changed, with the Standard & Poor’s 500 Index climbing less than 0.1 percent to 1,403.27 at 10:07 a.m. in New York.

Consumer Prices

Another report today showed the cost of living increased as gasoline prices picked up. The consumer-price index climbed 0.4 percent in February, the most in 10 months, after a 0.2 percent gain a month earlier, the Labor Department said in Washington. The so-called core measure, which excludes fuel and food, rose 0.1 percent, less than forecast.

Higher fuel prices may have weighed on consumer sentiment this month, other data showed. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 74.3, the lowest this year, from 75.3 the prior month.

Industrial output last month was tempered by limited utility use because February was relatively mild. The average temperature was 38.2 degrees Fahrenheit (3.4 Celsius) last month, 3.6 degrees warmer than the 20th century average and the 17th warmest February in 118 years.

Utilities and Mines

Utility production was little changed in February after slumping 2.2 percent in January. A 1.2 percent drop in mining, which includes drilling for oil and natural gas, also hindered total industrial output.

Capacity utilization, which measures the amount of a plant in use, was little changed at 78.7 percent last month after 78.8 percent in January, today’s Fed report showed.

The output of motor vehicles and parts fell 1.1 percent after jumping 8.6 percent in January, today’s figures show. Manufacturing excluding autos and parts climbed 0.4 percent following a 0.6 percent increase.

Production of business equipment rose 0.6 percent after a 2.1 percent increase.

Auto manufacturing has been contributing to factory growth. Cars last month sold at the fastest pace in four years, led by Chrysler Group LLC and a surprise gain from General Motors Co. Light-vehicle sales accelerated to a 15 million annual rate, the strongest since February 2008, according to Ward’s Automotive Group.

CSX Corp. (CSX)

CSX Corp., the biggest U.S. eastern railroad, is benefitting as automotive demand climbs, prompting forecasters to revise estimates for 2012 light-vehicle production to 14.4 million cars. The Jacksonville, Florida-based company said yesterday its auto volume has advanced about 20 percent this year through March 9.

“From our perspective, we’re seeing an economy that is sequentially improving,” Fredrik Eliasson, chief financial officer at CSX, said at a JPMorgan Chase & Co. conference in New York. “Our merchandise business is on track. We’re about 3 percent up. Clearly, automotive is helping that significantly.”

Auto production “is critical not just for our automotive business, but also for our steel business, our chemical business and our intermodal business,” he said.

Regional manufacturing reports yesterday showed factories continue to expand in March.

Regional Data

The Federal Reserve Bank of Philadelphia’s general economic index increased to 12.5, the highest since April, from 10.2 in February. The Federal Reserve Bank of New York’s general economic index unexpectedly increased to 20.2, the fastest pace of expansion since June 2010, from 19.5 last month. Readings greater than zero in both gauges signal expansion.

While the job market is improving, Fed policy makers said the unemployment rate is too high.

“Labor market conditions have improved further,” Federal Open Market Committee members said in a March 13 statement. “The unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance.”

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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