Industrial Production Higher in February

Industrial production grew by 0.7 percent in February, with all of the strength coming from a big pickup in output at utilities. Factory production was flat.

The sharp increase reported for overall industrial activity by the Federal Reserve on Friday came after a 0.3 percent dip in January.

January's drop reflected a huge decline in production at gas and electric utilities due to unusually warm weather. The 7.9 percent increase in utility output registered in February came with the return of colder, more-normal winter weather, the Fed said.

Production at factories, meanwhile, was flat in February, after jumping by a strong 0.8 percent in January. The showing in February was the weakest since a 0.5 percent decline in factory output in September.

Weakness in the automotive sector was a factor in February's lackluster showing for factory activity.

The report offered a mixed picture on activity within the industrial sector of the economy.

Output at mines fell by 0.5 percent last month, following a 2.3 percent increase in January.

The 0.7 percent increase in overall industrial activity in February was slightly weaker than economists were expecting. Before the report was released, they were forecasting a 0.8 percent increase.

Economists believe the economy snapped out of an end of year lull and will log healthy growth in the January-to-March quarter.

Against that backdrop, analysts expect the Federal Reserve will boost short-term interest rates by one-quarter percentage point to 4.75 percent when it meets on March 27-28. It will be Ben Bernanke's first meeting to examine interest rates as Fed chairman.

The Fed has been tightening credit for nearly two years in an effort to keep the economy and inflation on an even keel.