Industrial Production Surged in February

Big industry production rose by a strong 0.7 percent in February, an encouraging sign that the nation's manufacturers may be getting a stronger grip on their own recovery.

The increase in output at the nation's factories, mines and utilities came after a 0.8 percent jump in activity in January, the Federal Reserve (search) reported Monday.

Last month's industrial production performance was even better than the 0.4 percent increase that some economists were forecasting. Gains were widespread in February, with production rising for automotive products, home electronics, business equipment, machinery, food products and chemicals.

"This breadth of the recovery bodes well for future production," said Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI (search), a research group.

That's especially goods news for manufacturing, which was hardest hit by the 2001 recession and has had an uneven journey to get back on firm footing.

The latest snapshot of industrial activity also boded well for healthy economic growth in the first three months of this year. Analysts believe the economy grew at an annual rate of more than 4.5 percent in the current January-to-March quarter, up from a 4.1 percent pace in the fourth quarter of 2003.

But on Wall Street, the report failed to lift jittery investors. The Dow Jones industrials were off 76 points in morning trading.

The Federal Reserve's report also showed that production at factories — the biggest slice of industrial output tracked by the Fed — went up by 1 percent in February — a big pickup from January's 0.2 percent increase and the best performance since November.

Output at mines nudged up by 0.1 percent in February, following a 0.4 percent increase the month before. At gas and electric utilities, however, production fell by 0.7 percent as temperatures returned to more seasonal norms, the Fed said. Unusually cold weather in January increased demand for gas and electricity and had pushed output at utilities up by 5.3 percent.

The operating capacity at factories, mines and utilities rose to 76.6 percent in February, up from 76.1 percent in January. Even with the increase, analysts say that many plants are still operating below capacity.

Against that backdrop, the Federal Reserve is widely expected to hold short-term interest rates at a 45-year low of 1 percent when it meets on Tuesday, economists said. By keeping rates super low, consumers and businesses might be motivated to spend and invest more, forces that would boost economic activity.