Industrial Production Rose 0.1% in Feb

Industrial production edged up 0.1% in February, beating expectations and marking the eighth straight monthly increase. But the key manufacturing sector - for months a rare bright spot - produced less, muting hopes for a speedy recovery.

The Federal Reserve reported Monday that manufacturing, the index's largest component, fell 0.2%; while mining and utilities increased by 2.0% and 0.5%, respectively.

Manufacturing took a hit from winter storms that shut down most of the Northeast in February, decreasing hours worked at factories and restraining workers' earnings. However, the storms increased demand for heating energy, boosting mining and utility production.

It was a return to more measured gains after January's 0.9% increase. The index's consistent upward trend suggests that economic improvement is durable, if modest.

After three months of winter weather dampening manufacturing and boosting energy output, some economists expected to see a manufacturing rebound in March, reflecting the sector's overall upward trend. With inventories razor thin, businesses will need to place more orders to meet even a small uptick in demand.

Once businesses have replenished their inventories, though, economists said the recovery will gain momentum only if consumer demand increases.

Production of consumer goods fell in February as factories built fewer cars, appliances and other durable goods.
When production of consumer products rises, it will indicate that Americans are spending again - a necessary condition for robust economic growth. High unemployment and stagnant wages have so far prevented a consumer-driven rebound.

Despite a strong outlook for the manufacturing sector in the coming months, "it will be up to (consumer) demand to carry the baton," said Joshua Shapiro, chief U.S. economist at MFR Inc.

"We believe the recovery process will be subdued and uneven as the household sector continues to struggle with ravaged balance sheets and lingering labor market weakness," Shapiro said in a written analysis.

American industry was operating at 72.7% of its full capacity. The eighth straight monthly gain, it was a 0.2% increase from January - though still 7.9 percentage points below its average from 1972 to 2009.
 

By DANIEL WAGNER, AP Business Writer