US industrial production rose 0.6 percent in March, slightly more than expected, as mining and utility output became less volatile and capacity use reached its highest point in 5-1/2 years, the Federal Reserve said on Friday.
The Fed said output from the nation's mines rose 0.9 percent in March after falling 0.7 percent in February, as oil and gas facilities continued their recovery from hurricanes last year and coal output surged.
March utility output rose 0.5 percent after a large jump in February due to cold temperatures followed a big decline in January driven by warm weather. Manufacturing output also rose 0.5 percent, driven by strong gains in motor vehicles and electronics.
Capacity utilisation, a measure of how close to full potential factories, mines and utilities are running, rose to 81.3 percent from a downwardly revised 81.0 in February, marking its highest level since reaching 81.5 percent in September 2000.
Wall Street analysts polled by Reuters had expected overall March industrial production to rise 0.5 percent and capacity use to reach 81.4 percent.
The strong numbers are likely to reinforce views among some Federal Reserve policy-makers that tightening labour markets and rising capacity use could create inflationary pressure. Fed governor Donald Kohn said on Thursday the Fed is examining economic data in a "meeting by meeting" approach on whether to continue its rate tightening campaign to curb inflation.
"This report does not add to the case that there's a visible slowing in the economy. It keeps (the Fed) directly on path to tighten in May and leaves the debate on whether they will tighten in June certain to be a very lively one," said Dana Johnson, chief economist at Comerica Bank in Detroit.
"The Fed needs more evidence than they have on hand" to take a more neutral view of interest rates, he said, adding that he believes the slowing housing sector and higher energy prices will cool US economic growth this year.
US financial markets were closed on Friday for the Good Friday holiday.
All major sectors contributed to the March increase in production, with the largest gains in materials and business equipment, both of which increased 0.8 percent. Production of construction supplies rose 0.2 percent after a 0.8 percent drop in February.
Output of durable goods, which are meant to last three years or more, rose 0.7 percent after being flat in February. Motor vehicles and parts production rose 1.5 percent after a 1.1 percent fall in February, while output of computers and electronics products jumped 1.7 percent after a 0.6 percent gain in February.
Capacity use in the manufacturing sector rose to 80.4 percent in March from 80.2 in February, while capacity use at mines was 87.2 percent and utilities were using 85.3 percent of their capacity.
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