US factories flex muscle after winter chill

The country's manufacturing output recorded its largest increase in six months in Feb

US manufacturing output recorded its largest increase in six months in February and factory activity in New York state expanded, in the latest signs that economic activity was gaining momentum after being dampened by severe weather.

Factory production increased 0.8 percent last month, its largest increase since last August, the Federal Reserve said on Monday. That followed January's 0.9 percent decline, which was the largest drop since May 2009.

In a separate report, the New York Fed said its "Empire State" general business conditions index rose to 5.61 in March from 4.48 in February. There was an increase in new orders and shipments, as well as inventories.

"U.S. factories seemed to make up for lost time. This provides some hope that we are beginning to move past the period of weather-impacted activity," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

The manufacturing data added to reports such as retail sales and employment that have suggested the economy was regaining strength after abruptly slowing down at the end of 2013 and early this year as an unusually cold winter took its toll.

Stocks on Wall Street opened higher on the data while prices for US Treasury debt fell marginally. The dollar was little changed against a basket of currencies.

Manufacturing last month rose in key categories, with motor vehicle output rebounding 4.8 percent after tumbling 5.2 percent in January. There were also notable gains in machinery and fabricated metal products.

"Manufacturers are becoming more optimistic about the impending rebound in economic activity, suggesting improving prospects for economic growth after weather-inspired first-quarter weakness," said Gennadiy Goldberg, an economist at TD Securities in New York.

Mining production rose 0.3 percent last month, but utilities output fell 0.2 percent. The rise in manufacturing and mining output helped to lift overall industrial production 0.6 percent in February.

Production at the nation's mines, factories and power plants had slipped 0.2 percent in January.

Economists polled by Reuters had expected manufacturing output to rise 0.2 percent and industrial production to edge up 0.1 percent last month.

The amount of industrial capacity in use increased to 78.8 percent in February from 78.5 percent in January.

Industrial capacity utilization, a measure of how fully firms are using their resources, was 1.3 percentage points below its long-run average.

Officials at the Fed tend to look at utilization measures as a signal of how much "slack" remains in the economy, and how much room there is for growth to run before it becomes inflationary.