US manufacturing output increases solidly in February

WASHINGTON • US factory output increased for a sixth straight month in February, suggesting that the manufacturing recovery was gathering speed as rising commodity prices boost demand for machinery and other equipment.

The United States Federal Reserve said yesterday that manufacturing production rose by 0.5 per cent last month.

January's output was revised upwards to show a 0.5 per cent gain instead of the previously reported 0.2 per cent increase.

Despite the increase in manufacturing output, overall industrial production was unchanged last month because of a 5.7 per cent weather-driven plunge in utilities generation. Industrial production fell by 0.1 per cent in January.

Mining output increased by 2.7 per cent last month, lifted by a 7.1 per cent surge in oil and gas well drilling. Economists polled by Reuters had forecast manufacturing output increasing by 0.4 per cent last month and industrial production climbing by 0.2 per cent.

Manufacturing, which accounts for about 12 per cent of the US economy, is regaining ground as the prolonged drag from lower oil prices, a strong US dollar and an inventory overhang fades.

Manufacturing production rose by 0.5 per cent last month, the US Federal Reserve says. The effects of lower oil prices, a strong US dollar and an inventory overhang are fading. PHOTO: AGENCE FRANCE-PRESSE

The sector is also benefiting from a surge in sentiment amid promises by the Trump administration to pursue business-friendly policies, including tax cuts and deregulation.

But with details of President Donald Trump's economic policy still vague, the jump in sentiment has not translated into strong business spending on equipment.

Last month, manufacturing output was boosted by a 0.8 per cent rebound in the production of motor vehicle and parts. Machinery output increased by 1.1 per cent, while computer and electronic product output rose by 0.7 per cent last month.

With manufacturing output accelerating, capacity utilisation - a measure of how fully factories are deploying their resources - rose by 0.3 percentage point to 75.6 per cent last month, the highest since October 2015.

Overall industrial capacity utilisation fell by 0.1 percentage point to 75.4 per cent. It is 4.5 percentage points below its long-run average.

Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.


A version of this article appeared in the print edition of The Straits Times on March 18, 2017, with the headline 'US manufacturing output increases solidly in February'. Print Edition | Subscribe