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US factory output picks up in February for 2nd month

WASHINGTON – U.S. factories produced more machinery, appliances and other goods last month, the second straight increase in output and a sign manufacturing may be stabilizing after a difficult year.

The Federal Reserve said Wednesday that factory production rose 0.2 per cent in February, after rising 0.5 per cent the previous month. The increases in the past two months follow four declines in the previous five months.

The gains suggest that U.S. manufacturers are overcoming challenges from the strong dollar and weak overseas growth, which have cut into exports. Factories added jobs last year at the weakest pace since the recession ended in 2009.

Overall industrial production, which includes utilities and mining, fell 0.5 per cent last month, the fourth drop in five months. Utility production plunged 4 per cent as mild temperatures lowered demand for heat.

And mining output, which includes oil and gas drilling, fell 1.4 per cent, a result of low oil prices.

The plunge in oil prices has dragged down mining output for more than a year. Mining production has fallen an average of 1.3 per cent a month for the past six months, the Fed said. Oil and gas well drilling has collapsed more than 60 per cent since late 2014.

Automakers trimmed output in February, after a large increase in the previous month. Clothing production jumped 3 per cent.

U.S. factories had been weighed down by the strong dollar and weaker overseas growth since the beginning of last year.

A stronger dollar makes U.S. goods more expensive overseas and lowers the price of competing imports. Slower growth in China, Europe and Japan has also reduced demand for U.S. products and cut into corporate profits, which can lower business spending on big-ticket manufactured goods.

Other recent manufacturing data has also shown some recovery. The Institute for Supply Management, a trade group, said its measure of factory activity in February showed that manufacturing shrank for the fifth straight month. Yet its gauge rose to 49.5, close to a reading above 50, which signals expansion.

And orders for manufactured goods rose 1.6 per cent in January, after two straight declines, a sign output could increase again in the coming months.