US manufacturing output beats expectations in February

A worker operates one of the metal cutting machines at the Gent Machine Co. factory in Cleveland
FILE PHOTO: A worker operates one of the metal cutting machines at the Gent Machine Co. factory in Cleveland, Ohio, U.S. May 26, 2021. REUTERS/Timothy Aeppel

March 17, 2022

WASHINGTON (Reuters) – Output at US factories accelerated in February, shaking off a prolonged slump in auto production, indicating continued strength in manufacturing amid healthy demand for goods even as consumer spending shifts back to services.

Manufacturing output rose 1.2% last month after rising 0.1% in January, the Federal Reserve said on Thursday.

Economists polled by Reuters had forecast a 0.6% acceleration in factory production. Production increased by 7.4% compared to February 2021.

Manufacturing, which accounts for 11.9% of the economy, has benefited from a shift in spending towards goods from services during the COVID-19 pandemic.

However, manufacturers are struggling to cope with strong demand amid acute coronavirus-induced labor shortages on factory floors and elsewhere along the supply chain.

Supply shortages had shown signs of easing in recent months, but that progress is likely to be stalled by Russia’s war with Ukraine, as well as fresh lockdowns in China following a resurgence of COVID-19 infections.

Auto factory production fell 3.5% last month, marking the third straight monthly decline. Motor vehicle production continues to be hampered by a global shortage of electronic components.

The increase in manufacturing output in February coupled with a 0.1% increase in mining led to a 0.5% increase in industrial production. This was followed by a 1.4% jump in January. Utilities output fell 2.7% after rising 10.4% in January amid freezing temperatures in many parts of the country.

Manufacturing capacity utilization, a measure of how fully companies are using their resources, rose 0.9 percentage points to 78.0% in February. It is 2.5 percentage points above pre-pandemic levels, but 0.1 percentage points below its long-term average.

The overall capacity utilization of the industrial sector rose 0.3 percentage points to 77.6% last month. It is 1.9 percentage points below its 1972-2021 average.

Fed officials tend to scrutinize capacity utilization measures for signals of how much “squishy” remains in the economy — how far growth has room to go before it turns inflationary.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama) US manufacturing output beats expectations in February


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