Industrial production surprises with 0.1 pct. gain in Feb; but storms send manufacturing lower

Industrial production rises 0.1 percent in Feb.

WASHINGTON — Industrial production edged up 0.1 percent in February, beating expectations and marking the eighth straight monthly increase. The manufacturing sector — for months a rare bright spot in the economy — produced less due to winter storms but is expected to rebound in March.

The Federal Reserve said Monday that manufacturing, the index’s largest component, fell 0.2 percent. Mining and utilities rose 2.0 percent and 0.5 percent, respectively.

Manufacturing took a hit from winter storms that shut down most of the Northeast in February. The storms reduced hours worked at factories and workers’ earnings. Still, the severe weather increased demand for heating energy, boosting mining and utility production.

The February figure for industrial production was a return to more measured gains after January’s 0.9 percent increase. The index’s consistent upward trend suggests that economic improvement is durable, if modest.

After three months of winter weather dampening manufacturing and boosting energy output, some economists expected to see manufacturing regain strength in March, reflecting the sector’s upward trend. With inventories thin, businesses will need to place more orders to meet even a small uptick in demand.

“The fundamentals are strong for continued manufacturing recovery driven by pent-up consumer demand, repair and replacement of business equipment and exports,” said Daniel Meckstroth, chief economist with the Manufacturers Alliance/MAPI. “The minor setback in February is expected to be followed by strong makeup gains in March.”

Once businesses have replenished their inventories, though, economists said the recovery will gain momentum only if consumer demand increases. Persistently high unemployment and stagnant wages have so far prevented any surge in consumer spending.

Production of consumer goods fell in February as factories built fewer cars, appliances and other durable goods. When production of consumer products rises, it will indicate Americans are spending again — a necessary ingredient for robust economic growth.

Despite a strong outlook for the manufacturing sector in the coming months, “it will be up to (consumer) demand to carry the baton,” said Joshua Shapiro, chief U.S. economist at MFR Inc.

“We believe the recovery process will be subdued and uneven as the household sector continues to struggle with ravaged balance sheets and lingering labor market weakness,” Shapiro said in a written analysis.

Meckstroth said the volatile automotive sector caused February’s decline in production of consumer products. Without cars and auto parts, overall manufacturing production would have risen 0.1 percent, he said.

The auto industry was hurt by ripples from the closing of several Toyota factories in February related to a spate of product recalls.

American industry was operating at 72.7 percent of its capacity. The eighth straight monthly gain, it marked a 0.2 percent increase from January. Still, it remains 7.9 percentage points below its average from 1972 to 2009.