Manufacturing output in the United States picked-up more than expected in February, the latest sign that the economy is shaking off the winter blues that slowed growth in December and January due to unseasonably cold and snowy conditions.
The Federal Reserve reported on Monday that industrial production, a measure of output at factories, expanded by 0.6 percent last month, following a revised 0.2-percent contraction in January (originally estimated as a 0.3% decline). February’s advance was the biggest one-month jump in six months. Economists were predicting growth in February, but only 0.2 percent.
Meanwhile, November’s change was increased to 0.8 percent from 0.7 percent and December’s was modified from a 0.3-percent rise to a flat month.
Increases were broad, with all of the major market groups advancing in February from January. Final products were up 0.9 percent; nonindustrial supplies rose 0.5 percent and production of materials improved 0.4 percent.
The biggest component of industrial production, manufacturing output, surged by 0.8 percent last month, nearly erasing all of the 0.9-percent drop in January (originally estimated at -0.8%). Economists were targeting a rise of 0.2 percent for manufacturing output. Production at mines rose 0.3 percent last month, while output of utilities eased by 0.2 percent after a large rise of 3.8 percent in January as part of the freezing conditions blanketing most of the U.S.
Compared to February 2013, manufacturing output was ahead by 1.5 percent.
“Much of the swing in the rates of change for production in January and February reflected the depressing effects on output of the severe weather in January and the subsequent return to more normal levels of production in February,” the Federal Reserve said in its report.
Industry capacity utilization, a measure of how fully manufacturers are using all of their resources, increased from 78.5 percent in January to 78.8 percent last month. February’s figure is 1.3 percentage points above the long-run average for capacity utilization. The increase in February also hints that factories ratcheted up activity after relying upon using some stockpiles that had been accumulating amid a slowing economy.
Economy Gaining Some Momentum
The rise in industrial production joins reports from last week that showed the U.S. economy started gaining some traction again in February after dismal reports from the two prior months. Consumers left their houses again to go shopping as judged by retail sales improving 0.3 percent in February. The latest reports on employment from the Labor Department showed the nation creating 175,000 new jobs last month and that first-time filings for jobless benefits declined in the first week of March to a three-month low.
In a separate report on Monday, the New York Federal Reserve Bank said that its Empire State Manufacturing Survey showed modestly improving business conditions for factories in New York. The index inched up to 5.6 in March, after nose-diving 8.0 points to 4.5 in February. The index, which is assembled through a survey of manufacturing plants, is one of the earliest regional monthly barometers of factory conditions in the U.S. Readings over zero indicate improving conditions, while below signals deteriorating conditions.
The new orders index, a closely watched component, increased from -0.21 to 3.13; the shipments index edged up to 4.0 from 2.1; and the inventories index rose from -5.0 to 7.06. There were soft spots, though, including the employment index for number of employees declining by 5.37 to 5.88 and the index of future business conditions falling from 38.99 to 33.21.
The markets are taking the news positively Monday morning after getting pummeled in the second half of last week to have all three major indexes close the week red. In morning action, the Dow Jones Industrial Average is ahead by 160 points, the S&P 500 is up by 16 points and the Nasdaq has added 40 points.
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