Factory output down in February
Auto industry slowdown pushes decline into 3rd month
WASHINGTON — Output at U.S. factories fell for a third straight month in February, driven by a big drop in production at auto plants.
The Federal Reserve said Monday that manufacturing output fell 0.2 percent in February after a decline of 0.3 percent in January. Overall industrial production edged up a slight 0.1 percent in February, as unusually cold weather in many parts of the country led to a surge at utilities.
“We’re in a soft patch,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Conn. As the U.S. moves into the spring and the bottlenecks caused by shipping delays at West Coast ports abate, “the manufacturing sector might perk up a little again. I don’t think too much of this current softness should be extrapolated forward.”
The weakness at factories is attributed in part to a stronger dollar, which makes U.S. exports more expensive in overseas markets, and supply disruptions from the labor dispute at West Coast ports.
Analysts, however, aren’t too concerned. They say rising consumer spending will likely offset the recent lackluster showing in manufacturing. Solid job gains and lower gasoline prices should give households more to spend on other items.
“We expect that the strong domestic economy will ensure that manufacturing output continues to grow at a reasonable pace despite the strong dollar,” said Paul Dales, senior economist at Capital Economics.
The February factory weakness was led by a 3 percent drop in production of motor vehicles and parts, the third straight decline in the category. Production of machinery and primary metals such as steel and appliances also fell.
Manufacturing growth has slowed over the past six months. U.S. producers have had to contend with a rising dollar, which makes their goods more expensive in foreign markets. Production has also been hurt by supply disruptions from the West Coast labor dispute. The dispute was settled in the third
week of February, but analysts said it could take months to work through a backlog of containers at the port.
The 7.3 percent surge in utility output reflected frigid temperatures on the East Coast and record snowfall levels in the Northeast.
Output in mining fell 2.5 percent in February, with oil and gas well drilling down 17.3 percent — the biggest onemonth drop in nearly three decades. Oil prices have skidded by about half since last summer, which has led drilling companies to hold off on new wells and reduce oil and gas extraction.
U.S. homebuilders are feeling slightly less confident in their sales prospects, but their overall sales outlook remains favorable, according to the National Association of Home Builders/Wells Fargo builder sentiment index released Monday.
The index slipped to 53 this month, down two points from 55 in February. It’s the third monthly decline in a row for the index.
Readings above 50 indicate more builders view sales conditions as good, however.
Labor shortages, a dearth of available land parcels cleared for new home construction and tougher mortgage-lending standards weighed on builders’ confidence this month, said David Crowe, the builder group’s chief economist.
“These obstacles notwithstanding, we are expecting solid gains in the housing market this year, buoyed by sustained job growth, low mortgage interest rates and pent-up demand,” Crowe added.
Despite the increasingly favorable economy, home sales have been sluggish so far this year after a lackluster 2014.
Manufacturing activity in New York state expanded at a slightly slower pace in March, dragged by weaker shipments and new orders.
The Federal Reserve Bank of New York said Monday that that its Empire State manufacturing index slipped to 6.9 in March from a reading of 7.8 in February.
The survey adds to signs that factory output may be slowing after solid gains for much of last year. The rising value of the dollar has hurt exports by making Americanmade goods more expensive in overseas markets.