Industrial production grew at a slower rate in February as utility outputs dropped back down from an unusually cold January. Manufacturing took the driver seat on the month, despite a sharp drop in auto production.
The top line for production activities remained solid at 0.5% increase month-over-month, while capacity utilization inched up to 77.6% from the downwardly revised 77.3% in January, the Federal Reserve reported on Thursday. The increase in capacity utilization will help to improve our RSM US Supply Chain Index, which will be released next week.
Except for utility outputs, which fell 2.7%, both manufacturing and mining outputs posted gains on the month. Manufacturing activities rose 1.2% on the back of non-auto products.
The output for motor vehicles declined for the third straight month, down 3.5% in February, as the chip shortages and rising input prices continued to plague the industry, hampering growth.
After a temporary slowdown in January, domestic outputs for petroleum and coal bounced back sharply, rising 2.29% on the month. Rising oil and other energy goods prices will certainly continue to incentivize more outputs from the sector in March.
The current disruptions in global production will be an opportunity for the U.S. industrial sector to step up and fill the gap. We expect the solid recovery of the sector to continue further in the coming months.