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US factory output rises at 0.8 percent pace in February, fueled by jump in auto production

A strong increase in auto output boosted U.S. factory production last month, the latest sign that manufacturing is helping drive economic growth after lagging for much of 2012.

Factory output rose a seasonally adjusted 0.8 percent in February from January, after falling 0.3 percent in the previous month, the Federal Reserve said Friday.

The biggest gain was in autos and auto parts, where production increased 3.6 percent after falling 4.9 percent in January. Car sales have risen steadily this year after reaching a five year high in 2012.

Overall industrial production, which includes mining and utilities, rose 0.7 percent in February. That is the most in three months. Utility output jumped 1.6 percent while mining output, which covers oil and gas drilling, fell 0.3 percent, the third straight decline.

The report adds to recent signs that manufacturing is picking up.

A closely watched index of U.S. manufacturing activity increased in February for the third straight month. Big increases in new orders and production pushed the Institute for Supply Management's index to its highest level in 20 months.

Auto sales, meanwhile, reached their highest level in five years in 2012 and are still rising. New car and truck sales rose 4 percent in February from a year earlier to an annual pace of 15.4 million. That's a big improvement from sales of only 10.4 million in 2009. It's still short of the pre-recession peak of 17 million in 2005. Auto makers are expected to have boosted output last month to keep up with the sales.

Manufacturers also stepped up hiring last month, adding 14,000 jobs. The industry has added 39,000 in just the past three months.

Increasing factory output is contributing to an improved outlook for the economy this year. Americans are spending more, despite higher Social Security taxes and a sharp increase in gas prices. Retail sales rose in February at a healthy pace.

The job market is also gaining steam. Employers have added more than 200,000 jobs per month in the past four months, nearly double the average last spring. That's pushed the unemployment rate down to a four-year low of 7.7 percent.

As a result many economists are more optimistic about growth in the January-March quarter. Joseph LaVorgna, chief economist at Deutsche Bank, raised his forecast for first quarter growth to an annual rate of 3 percent, up from only 1.5 percent.

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