Industrial output picked up slightly in February, though extreme winter weather hindered manufacturing growth.

Industrial production in the United States rose 0.1 percent in February, marking the eighth consecutive monthly increase, according to the Federal Reserve this week. At 101 percent of its 2002 average, total industrial output in February was 1.7 percent above its year-earlier level.

Capacity utilization, which indicates how much of the country’s production capability is in use, rose 0.2 percent to 72.7 percent, a rate 7.9 percentage points below its average from 1972 to 2009.

However, manufacturing activity, the index’s largest component, decreased 0.2 percent after rising 0.9 percent in January. The output level in February was 1.5 percent above its year-earlier level.

The drop in manufacturing was largely due to winter storms in the Northeast, which temporarily shut down factories in the region, reduced the length of the work week and restrained workers’ earnings.

“Unfortunately, severe weather across the coasts of the United States last month disrupted transportation and production schedules,” Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, said in an analysis of the Fed report. “Production in consumer durables industries was particularly affected.”

Overall production of consumer goods fell 0.4 percent in February. While the index for consumer non-durables edged up 0.1 percent in February, the index for consumer durables fell 2.3 percent.

Following a 1.7 percent rise in January, factory output of durable goods fell 0.3 percent in February. A 4.4 percent drop in automotive products led the decline in consumer durables, while other major components registered small declines.

“An important contributor to the weakness was that Toyota closed several factories in February, which rippled adversely through the supply chain,” Meckstroth continued.

Toyota Motor Corp. halted production at several factories for a week in February as it worked to correct safety issues in several models. Meckstroth noted that without cars and auto parts, manufacturing production would have risen 0.1 percent.

“Despite the decrease last month, the output of consumer durables was up 9.2 percent from its year-earlier level as a result of an increase of 27 percent in automotive products,” the Fed report said.

On the upside, the winter storms increased demand for heating energy, boosting mining and utilities output by 2 percent and 0.5 percent, respectively. Capacity utilization rose 0.7 percent and 0.3 percent in the two industry groups.

“Economists said Monday’s report indicated that a recovery for the manufacturing sector was intact, even though output slowed in February,” the New York Times reported. “Over all, demand appears to be gaining strength, led by a 1 percent increase in electronics and computer production last month.

“With the prospects for a recovery looking better, businesses are beginning to tentatively rebuild inventories. That has helped drive factory orders and made manufacturing one of the few bright spots of the economy,” the Times continued. “The sector continues to outpace the growth of the overall economy.”

Indeed, many experts, pointing to manufacturing’s role in the U.S. economic recovery, are encouraged.

“Improbable as it seems, the brightest spot so far in the nation’s spotty economic recovery is a sector long considered all but dead — good-old-fashioned manufacturing,” McClatchy said this week. “Factories are churning. Exports are up. Even though jobs are the bleakest aspect of the overall economy these days, factory payrolls have turned positive.”

Manufacturing jobs remain a large concern, of course. The recession that began in December 2007 eliminated more than 2 million American manufacturing jobs, about one out of every seven positions. However, as economist Ken Mayland noted in an MSNBC.com report this week, “loss of manufacturing jobs” is “not the same as a loss of manufacturing.”

After a few months of winter weather dampening manufacturing and boosting energy output, some economists expect to see a manufacturing rebound in March, reflecting the sector’s overall upward trend.

“There’s a pretty solid uptrend in place,” Dana Johnson, chief economist for Comerica, told the Times. “Manufacturing is doing noticeably better than other parts of the economy.”

“We believe that the fundamentals are strong for continued manufacturing recovery driven by pent up consumer demand, repair and replacement of business equipment, and exports,” Meckstroth said. “The minor setback in February is expected to be followed by strong makeup gains in March.”

Resources

Industrial Production and Capacity Utilization
U.S. Federal Reserve, March 15, 2010

…Fundamentals Strong Despite February Weather Issues
by Daniel J. Meckstroth
The Manufacturers Alliance/MAPI, March 15, 2010

Production Increases Again, Pointing to Improved Demand
by Javier C. Hernandez
The New York Times, March 15, 2010

Manufacturing Comes Back to Life
by Don Lee
McClatchy, March 15, 2010

Yes, We Do Still Make Things in America
by Allison Linn
MSNBC.com, March. 15, 2010