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U.S. Factory Output Rebounds in February and Exceeds Estimates

Updated on

U.S. Factory Output Rebounds in February and Exceeds Estimates

U.S. factory production bounced back in February, far exceeding analyst estimates and showing a key part of the economy is on track for steady growth this quarter, Federal Reserve data showed Friday.

Highlights of Industrial Production (February)

  • Factory output increased 1.2% (est. 0.5% gain) after dropping a revised 0.2%
  • Total industrial production, which also includes mines and utilities, rose 1.1% (est. 0.4% rise) after a revised 0.3% decline
  • Capacity utilization, measuring the amount of a plant that is in use, grew to 78.1% (est. 77.7%) from 77.4%

Key Takeaways

The gain in factory output showed broad-based improvement, expanding the most since October last year as automobile production as well as oil and gas drilling rebounded, the report showed. The data support the outlook for a Fed rate increase next week, and could boost expectations that the central bank will ultimately hike four times in 2018 rather than the three projected by policy makers in December.

The outlook for manufacturing is solid, as lower taxes and a pickup in overseas markets are expected to spur business investment and exports. Continued strength in the labor market and rising household wealth should also support consumer demand for durable goods.

Other reports indicate manufacturing remains on solid ground: The Institute for Supply Management’s index showed U.S. factories expanded in February at the fastest rate since May 2004.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75 percent of total industrial production, accounts for about 12 percent of the U.S. economy.

Moving On Up

Other Details

  • Utility output declined 4.7 percent after rising 1.3 percent the prior month
  • Production of motor vehicles increased 3.9 percent
  • Mining production rose 4.3 percent, with oil and gas well drilling surging 11.6 percent
  • Production of consumer goods rose 0.1 percent, and output of business equipment climbed 1 percent
  • Machinery production increased 0.5 percent