U.S. manufacturing output increases solidly in February

REUTERS - U.S. factory output increased for a sixth straight month in February, suggesting the manufacturing recovery was gathering speed as rising commodity prices boost demand for machinery and other equipment.

The Federal Reserve said on Friday manufacturing production rose 0.5 percent last month. January's output was revised up to show a 0.5 percent gain instead of the previously reported 0.2 percent increase.

Despite the increase in manufacturing output overall industrial production was unchanged in February because of a 5.7 percent weather-driven plunge in utilities generation.

Industrial production fell 0.1 percent in January. Mining output increased 2.7 percent last month, lifted by a 7.1 percent surge in oil and gas well drilling.

Economists polled by Reuters had forecast manufacturing output increasing 0.4 percent last month and industrial production climbing 0.2 percent.

Manufacturing, which accounts for about 12 percent of the U.S. economy, is regaining ground as the prolonged drag from lower oil prices, a strong dollar and an inventory overhang fades.

The sector is also benefiting from a surge in sentiment amid promises by the Trump administration to pursue business-friendly policies, including tax cuts and deregulation.

But with details of President Donald Trump's economic policy still vague, the jump in sentiment has not translated into strong business spending on equipment.

Last month, manufacturing output was boosted by a 0.8 percent rebound in the production of motor vehicle and parts.

Machinery output increased 1.1 percent. There were also increases in the production of primary metals, fabricated metal products and nonmetallic mineral products. Computers and electronic products output rose 0.7 percent last month.

With manufacturing output accelerating, capacity utilization - a measure of how fully factories are deploying their resources - rose 0.3 percentage point to 75.6 percent last month, the highest since October 2015.

Overall industrial capacity utilization fell 0.1 percentage point to 75.4 percent. It is 4.5 percentage points below its long-run average.

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

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)