US factory output exceeds forecast, rises most in 4 months

[WASHINGTON] Production at US factories rose in February by the most in 4 months, indicating firmer momentum in a manufacturing sector still challenged by supply constraints and higher costs.

The 1.2 per cent increase followed a revised 0.1 per cent gain in January, Federal Reserve data showed Thursday (Mar 17). Total industrial production, which also includes mining and utility output, rose 0.5 per cent last month.

Factories were also able to ramp up capacity after weathering Omicron-related challenges in recent months. Capacity utilisation at factories rose in February to 78 per cent, the highest since 2018, from 77.1 per cent a month earlier. A steady inflow of orders - a reflection of steady demand from businesses and consumers - remains a source of strength for domestic producers. At the same time, still-fragile global supply chains and soaring materials costs continue to complicate the industrial recovery.

The pick-up in manufacturing output was broad-based in February, save for a drop in production of motor vehicles and parts. The Fed said that the 3.5 per cent decline reflected ongoing shortages of electronics components. Excluding cars and parts, factory output advanced 1.5 per cent.

Factory production last month was boosted by stronger output of mineral products, wood, aerospace equipment, apparel and furniture.

The median estimate in a Bloomberg survey of economists called for a 1 per cent monthly advance in factory output and a 0.5 per cent increase in total industrial production.

Total industrial production was restrained by a 2.7 per cent decline at utilities, reflecting a return to more seasonable weather after a colder January. Mining output climbed 0.1 per cent. Total capacity climbed to a an almost 3-year high of 77.6 per cent. The latest Institute for Supply Management figures showed stronger factory activity in February on firmer growth in orders and production. The report also highlighted lingering logistical challenges as average lead times for production materials, supplies and capital equipment set record highs. BLOOMBERG