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U.S. Industrial Production Fell 2.2% in February

By Xavier Fontdegloria

 

U.S. industrial production slipped in February, breaking four consecutive months of gains, as input shortages, supply bottlenecks and bad weather across the country weighed on factory activity.

Industrial production, a measure of factory, mining and utility output, decreased a seasonally adjusted 2.2% in February compared with January, the Federal Reserve said Tuesday. The reading marks the first fall since September and misses forecasts from economists surveyed by The Wall Street Journal, who expected a 0.3% rise.

In January, industrial output grew by a revised 1.1% compared with a 0.9% initial estimate.

"The severe winter weather in the south central region of the country in mid-February accounted for the bulk of the declines in output for the month," the Fed said. Some petroleum refineries, petrochemical facilities, and plastic resin plants suffered damage from the deep freeze and were offline for the rest of the month, it said.

Manufacturing output--the biggest component of industrial production-- fell by 3.1% in February from the prior month. A significant 8.3% drop in motor vehicle and parts, which reflected both a global shortage of semiconductors and the severe weather, contributed to the decline in total manufacturing output, the Fed said.

The U.S. industrial sector has gradually recovered from the slump it suffered in March and April 2020 amid the pandemic-related shutdowns, boosted by strong domestic and foreign demand and remaining largely insulated from the virus containment measures compared with other parts of the economy. Despite the gains, overall industrial production in February was 4.2% below the same month a year earlier, the last month before the Covid-19 pandemic brought the economy to a near halt.

Despite the pullback in February, economists see industrial activity picking up again in the coming months as lean inventories and order backlogs keep the sector active.

Mining output plunged 5.4% driven by drop of more than 6% for oil and natural gas extraction, the Fed said.

Utilities output soared 7.4% in February, offsetting some of the weakness elsewhere, driven by a surge in heating demand.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, decreased to 73.8% in February from 75.5% in January. Economists expected a 75.6% reading. Capacity utilization for manufacturing decreased 2.3 percentage points in February to 72.3%.

 

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

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March 16, 2021 09:53 ET (13:53 GMT)

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