U.S. manufacturing production increased more than expected in February, supported by a significant rise in motor vehicle output, according to the latest Federal Reserve data.
Factory output grew by 0.9% last month, following a revised 0.1% increase in January. This exceeded economists’ forecasts of a 0.3% rebound. On a year-over-year basis, manufacturing output was 0.7% higher compared to February 2024.
Manufacturing, which represents 10.3% of the U.S. economy, has been recovering in recent months following interest rate cuts by the Federal Reserve. Since September, the central bank has reduced its benchmark interest rate by 100 basis points, with the current range set between 4.25% and 4.50%.
Sector Breakdown
- Motor vehicle and parts production rose 8.5%, rebounding after two consecutive months of declines.
- Durable goods manufacturing increased 1.6%, driven by growth in various long-lasting products.
- Nondurable manufacturing edged up 0.2%, as higher chemicals production offset declines in food, beverage, and tobacco products.
- Mining output grew 2.8%, reversing a 3.2% decline in January.
- Utilities production fell 2.5%, following a sharp 6.1% increase in January due to colder weather.
Overall industrial production, which includes manufacturing, mining, and utilities, expanded 0.7% in February, following a 0.3% increase in January. Year-over-year, it rose 1.4%.
Capacity Utilization
Capacity utilization, which measures how efficiently firms are using their resources, increased to 78.2% in February from 77.7% in January. Despite this growth, it remains 1.4 percentage points below the historical average from 1972 to 2024. The manufacturing sector’s operating rate also improved, rising to 77.0%, though it remains 1.2 percentage points below its long-run average.
Impact of Trade Policies
While manufacturing output has shown signs of recovery, trade policies remain a factor influencing the sector. Tariffs and other trade measures continue to shape manufacturing trends, with economists noting mixed effects on long-term growth.
The Federal Reserve is expected to maintain its current interest rate range while continuing to assess broader economic conditions.
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