The U.S. industrial production index reached its highest level on record in February, driven by strong durable goods manufacturing and the rebound in mining activities. The index rose to 104.2 on a seasonally adjusted basis, according to the Federal Reserve.
The surge in the production of construction materials, automobiles, and oil and gas drilling equipment suggested that domestic companies ramped up their production because of the threat of tariffs that are set to start this month and next.
Those are the industries that will be affected the most as tariffs on Chinese, Canadian and Mexican goods rise.
The increase in overall production was consistent with the rise in the trade deficit in January as businesses pulled forward purchases of goods to get ahead of tariffs.
Capacity utilization also rose materially, to 78.2%, the highest level since last June, when producers built up their inventories ahead of the shopping season.
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While the increase in overall production was a good sign, the inventory buildup to get ahead of tariffs might create more volatility in inventories, which highlights the uncertainty that businesses are facing.
Higher inventories are often a good thing as they contribute positively to gross domestic product. But there are costs to having those inventories sitting on the shelves. A shock to demand, for example, could put pressure on businesses, especially when borrowing costs remain elevated.
