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Increased auto output boosts American factory production

Mar. 16, 2013 @ 12:00 AM

WASHINGTON -- 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.

Still, economists were encouraged by the broad-based gains in factory output. Rising home construction and increased business investment in machinery and other goods are also boosting manufacturers. The Fed's measure of factory production is at its highest level in more than four and a half years.

Production of construction supplies, which includes steel, cement and wood products, rose 1.5 percent, the fourth straight solid gain. Factories also cranked out more industrial machinery, appliances, and furniture.

"Growth has clearly picked up," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients. "This is another positive sign" for the economy in the January-March quarter.

O'Sullivan forecasts that growth will jump to a 3 percent annual rate in the first quarter, after barely expanding in the final three months of last year.

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