Factory Production in U.S. Rose in February for a Second Month
Factory production rose in February for a second month, boosted by demand for business equipment and indicating U.S. manufacturing may be starting to stabilize.
The 0.2 percent increase in output followed a 0.5 percent gain in January, data from the Federal Reserve showed Wednesday. It marked the first back-to-back advance since March-April 2015. Total industrial production dropped 0.5 percent as utility output plunged by the most since March 2007.
“It does seem that after a recent spell of weakness, manufacturing seems to have found a base,” said David Sloan, senior economist at 4cast Inc. in New York. “This strengthens the tentative perception that manufacturing is making a firmer step in the first quarter, which is encouraging.”
American factories might be catching a break from a modest climb in energy prices even as they battle dollar appreciation in a bid to regain momentum after months of malaise. Manufacturing is struggling to reaccelerate amid tepid global growth that’s holding back the U.S. economy, a reason Fed policy makers will probably refrain from raising interest rates at the conclusion of their two-day meeting.
Manufacturing output, which accounts for about 12 percent of the economy, was projected to rise 0.1 percent last month, according to the Bloomberg survey median. Total industrial production was forecast to decline 0.3 percent.
Capacity utilization, which measures the amount of a plant that is in use, fell to 76.7 percent in February from 77.1 percent the prior month. Manufacturing capacity was unchanged at 76.1 percent.
Warmer-than-usual temperatures in February depressed utility output by 4 percent after a 4.2 percent advance in January. Last month was the warmest February since 2000 in the contiguous U.S., according to the National Oceanic and Atmospheric Administration.
Mining, including oil drilling, dropped 1.4 percent in February after a 0.7 percent decline. Well drilling plunged 15.6 percent last month.
The U.S. rotary rig count has continued a relentless slide that started at the end of 2014, falling to 480 in the week ended March 11 from 489 in the prior period, according to Baker Hughes Inc. data.
Since late 2014, the Fed’s index of oil and gas well drilling and servicing has slumped more than 60 percent, the central bank said.
Business equipment production climbed 0.6 percent for a second month, while the output of consumer durable goods increased 0.3 percent after a 1.5 percent gain in January. Factories turned out more primary metals, computers and machinery last month.
Factory production of motor vehicles and parts dropped 0.1 percent after a 3.4 percent rise. Excluding autos and parts, manufacturing output rose 0.2 percent after advancing 0.3 percent the prior month.
While oil prices have climbed from a plunge that started in the middle of last year, capital spending in the industry will stay weak as inventories remain high. Wednesday’s report showed that investment outside oil and gas may be starting to perk up.
At the same time, the dollar remains strong and may bridle U.S. production. The trade-weighted dollar has fallen over the past two months while remaining close to a late-January reading that was its highest in more than 12 years.