US manufacturing output accelerates in Feb on surge in motor vehicle output

US manufacturing production increased more than expected in February, boosted by a surge in motor vehicle output, but tariffs are casting a shadow on the nascent factory recovery. 

Factory output jumped 0.9 per cent last month after an upwardly revised 0.1 per cent gain in January, the Federal Reserve said on Tuesday. Economists polled by Reuters had forecast production rebounding 0.3 per cent after a previously reported 0.1 per cent dip. 

Production at factories increased 0.7 per cent on a year-on-year basis in February. Manufacturing, which accounts for 10.3 per cent of the economy, has been recovering as the US central bank started cutting interest rates in September. 

 

President Donald Trump's often chaotic tariffs campaign, which has triggered a trade war, is seen undermining the sector. 

Reflecting back to Trump's first term, J.P. Morgan economists noted that "no long-term improvement in manufacturing was observed as a result of the 2018 tariffs." The US central bank is expected to leave its benchmark overnight interest rate in the 4.25 per cent-4.50 per cent range on Wednesday, having reduced it by 100 basis points since September, and continue to assess the economic impact of the Trump administration's policies. 

Motor vehicle and parts output accelerated 8.5 per cent after declining for two straight months. Durable manufacturing production increased 1.6 per cent, also boosted by rises in the output of other long-lasting goods. Nondurable manufacturing production rose 0.2 per cent as gains in chemicals output offset a decline in food, beverage and tobacco products. 

Mining output rebounded 2.8 per cent after decreasing 3.2 per cent in January. Utilities production fell 2.5 per cent as a rise in temperatures lowered demand for heating. Utilities production had shot up 6.1 per cent in January amid frigid weather. 

Industrial production increased 0.7 per cent after climbing 0.3 per cent in January. It surged 1.4 per cent year-on-year in February. 

Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, increased to 78.2 per cent from 77.7 per cent in January. It is 1.4 percentage points below its 1972-2024 average. The operating rate for the manufacturing sector rose 0.6 percentage point to 77.0 per cent. It is 1.2 percentage points below its long-run average.     

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