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Snow plow clears snow after a heavy snowstorm - Source: Reuters -
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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.
They expect a rebound in industrial production in March.
The reports came ahead of a Federal Reserve meeting on interest
rates on Tuesday.
The US central bank is expected to hold overnight interest rates
in a range of zero to 0.25% and maintain a pledge to keep them
ultra-low for an extended period to nurture the recovery.
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% last month
after increasing 0.9% 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.
US stocks were little moved by the data, but dipped on persistent
concerns over possible monetary tightening in China that could slow
the global recovery from recession.
US government bond prices fell, while the dollar edged higher
against the Euro and the yen.
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 labor market
improves.
Employment measure soars
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.
"You're seeing a clear evidence of a V-shaped recovery in the
manufacturing sector, partly because it shrank so rapidly during
the recession but also, there's a lot of positive fundamentals,"
said Zach Pandl, an economist at Nomura Securities International in
New York.
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% after growing 0.9% in January.
Stripping out vehicle assembly, manufacturing rose 0.1%.
"We believe 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 at Manufacturers Alliance/MAPI in Arlington,
Virginia.
"The minor setback in February is expected to be followed by strong
makeup gains in March."
Mining increased 2.0%, adding to the 1.1% rise in January, while
utilities gained 0.5% after a 0.6% rise.
Capacity utilization, a measure of slack in the economy, inched up
to 72.7%, the highest since December 2008, from 72.5% 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 $47.6 billion of all US securities in January
but remained net buyers of US Treasury debt.
