The Federal Reserve Board said that manufacturing activity rebounded in February following weather-related weaknesses in January. Manufacturing production increased 0.8 percent in February, nearly offsetting the revised 0.9 percent decline from the month before. The year-over-year pace of manufacturing output rose from 1.3 percent to 1.5 percent. These very modest rates of growth reflect significant deceleration from the 3.8 percent pace seen in October. In terms of annual rates for the specific sectors, durable goods manufacturers had larger increases in production than their nondurable goods counterparts (up 2.7 percent to 0.5 percent, respectively).
Capacity utilization also mostly recovered in February, up from 75.9 percent to 76.4 percent. This was still below the 76.7 percent utilization rates observed in both November and December.
In February, durable and nondurable goods production rose 0.9 percent and 0.7 percent, respectively. The largest gains were seen in the motor vehicles and parts (up 5.7 percent), computer and electronic products (up 5.2 percent), plastics and rubber products (up 4.3 percent), machinery (up 3.0 percent), and furniture and related products (up 3.0 percent) sectors.
Nonetheless, there were 7 of the 19 major manufacturing sectors with continued declines in output, suggesting that the rebound could still be broader. Areas with decreased production included textile and product mills (down 2.7 percent), paper (down 2.0 percent), electrical equipment and appliances (down 1.4 percent), petroleum and coal products (down 1.3 percent), and wood products (down 1.2 percent).
Meanwhile, overall industrial production recovered in February, as well, up 0.6 percent following the 0.2 percent decline in January. In addition to the bounce-back in manufacturing, mining output rose 0.3 percent. Utility production declined 0.2 percent, but that followed a 3.8 percent jump in January as more Americans were using more energy to heat their homes. Industrial production increased 2.8 percent over the past 12 months, with capacity utilization rising 1.9 percent to 78.8 percent in February.
In summary, much has been made about the negative impact of weather on manufacturing output in the past couple months, and the February data suggest that production has picked back up as the temperatures warmed up, as we expected. (Ironically, I am writing this during yet another snow day here in Washington.)
Manufacturing production rose an annualized 3.0 percent in the second half of 2013, with durable goods output up 4.3 percent at the annual rate, providing a lot of momentum for 2014. Moreover, manufacturers are mostly upbeat about stronger demand and production over the coming months, a finding that we observed in the recent NAM/IndustryWeek survey. Still, the modest growth rates of the past couple months remind us that economic growth can be quite fragile, necessitating the need for pro-growth policies to keep the momentum going.
Chad Moutray is the chief economist, National Association of Manufacturers.
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