US industrial production braked sharply in February, held back by severe winter storms that slammed parts of the country, while manufacturing activity in New York state stalled this month. Analysts said Monday's data did not alter their views that the factory-led economic recovery remained on track, given weather disruptions and the fact that details of the reports showed underlying strength.
-- Capacity utilisation highest in more than a year
-- New York state manufacturing slows in March
-- They expect a rebound in industrial production in March.
While US manufacturing output fell in February, it rose outside of the auto sector, and mining activity posted a strong gain. In addition, factory employment, shipments and unfilled orders in New York state all rose this month. "The two reports were positive for the economy and they do indicate that the factory sector will make a positive contribution to growth in the first quarter," said Kenneth Kim, an economist at Stone & McCarthy Research Associates in Princeton, New Jersey.
The Federal Reserve said industrial output edged up 0.1 percent last month after increasing 0.9 percent in January, in line with market expectations. They blamed the slowdown on inclement weather. The report also showed the amount of the nation's industrial capacity in use hit the highest level in more than a year. Separately, the New York Fed said its March gauge of manufacturing activity in New York state slipped to 22.86 from 24.91 in February. Markets had expected the measure to fall to 22.00.
Manufacturing has led the economy out of the most severe downturn since the 1930s. But there are indications that consumers - the main engine of the economy - are starting to participate as the labour market improves. While manufacturing activity in New York state slowed this month, the report's employment index rose to its highest level since October 2007 and the inventories measure jumped above zero for the first time in more than a year.
Even more heartening, new orders and shipments soared from the prior month, while the average workweek lengthened markedly and the backlog of orders grew. In addition to inclement weather, industrial production last month was curbed by a steep drop in motor vehicle output - likely a reflection of the auto recalls by Toyota Motor Corp.
Manufacturing dipped 0.2 percent after growing 0.9 percent in January. Stripping out vehicle assembly, manufacturing rose 0.1 percent. Mining increased 2.0 percent, adding to the 1.1 percent rise in January, while utilities gained 0.5 percent after a 0.6 percent rise. Capacity utilisation, a measure of slack in the economy, inched up to 72.7 percent, the highest since December 2008, from 72.5 percent in January.
That was still 7.9 percentage points below the average from 1972 to 2009, the Fed said. A third report from the Treasury Department showed foreign investors sold a net $33.4 billion of all US securities in January but remained net buyers of US Treasury debt.