US industrial production rose last month for a second straight month, a sign manufacturing is starting to recover from a 1 1/2-year slump.
The 0.4 percent increase in production at US factories, mines and utilities last month was the largest since June 2000 and followed a revised 0.2 percent gain in January, according to the Federal Reserve yesterday. It was the first back-to-back increase since August-September 2000.
Manufacturers including General Motors Corp are starting to increase production to meet demand after businesses had reduced inventories in the fourth quarter at a record pace. That's helping the economy rebound from a recession that began last March.
The rise in production "heralds the beginning of the recovery," said Sung Won-sohn, chief economist at Wells Fargo & Co in Minneapolis, before the report. This "will lead to higher employment, not only to meet demand, but also to rebuild depleted inventories." Analysts had expected a 0.2 percent rise in industrial production, after January's previously reported 0.1 percent decrease, according to a Bloomberg News survey.
The plant-use rate rose to 74.8 percent last month from 74.5 in January. The February rate was the highest since 75 in October of last year.
Work at factories, which accounts for almost 90 percent of industrial production, increased 0.3 percent in February, matching the gain in the previous month. The consecutive monthly increase was the first since May-June 2000.
Electric and gas utility production rose 2.7 percent last month after decreasing 0.3 percent in January. Mine production and oil and gas drilling decreased 0.7 percent last month after falling 0.3 percent a month earlier.
Production of durable goods, which include automobiles, furniture and electronics, rose 0.4 percent for a second straight month.
Autos and auto parts production rose 0.5 percent.
Businesses reduced their stocks of unsold goods at an annual rate of US$120 billion from October through December, government statistics show. At the same time, consumer spending rose at the fastest pace in 3 1/2 years.
Business equipment production fell 0.4 percent following a 0.1 percent rise a month earlier. Production of computers, communications equipment and semiconductors rose 1.2 percent after rising 1.7 percent in January.
Dell Computer Corp, the largest personal computer maker, said this month that its fiscal fourth-quarter profit rose 5.1 percent, reflecting stronger consumer sales. What's more, corporate PC sales may revive in the second half of this year, Chairman and Chief Executive Michael Dell said.
Agilent Technologies Inc is also seeing improvements. The Palo Alto, California-based maker of electronics test and measurement tools said last week that orders rose 20 percent last quarter from the prior three months, the first gain after five periods of decline.
The economy probably will expand at a 2.6 percent annual pace between January and March after growing at a 1.4 percent rate in the fourth quarter, according to the latest consensus forecast in the Blue Chip Economic indicators survey. That's up from a 1.6 percent growth forecast last month and would be the strongest rate since a 5.7 percent pace in the second quarter of 2000.