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March 16, 2018 9:45 AM, EDT

Factory Output Rebounds in February and Exceeds Estimates

Luke Sharrett/Bloomberg News;

U.S. factory production bounced back in February, far exceeding analyst estimates and showing a key part of the economy is on track for steady growth this quarter, Federal Reserve data showed March 16.

Highlights of Industrial Production for February

• Factory output increased 1.2% (estimated 0.5% gain) after dropping a revised 0.2%.

• Total industrial production, which also includes mines and utilities, rose 1.1% (estimated 0.4% rise) after a revised 0.3% decline.

• Capacity utilization, measuring the amount of a plant that is in use, grew to 78.1% (est. 77.7%) from 77.4%.

Key Takeaways

The gain in factory output showed broad-based improvement, as automobile production as well as oil and gas drilling rebounded, the report showed. The data support the outlook for a Fed rate increase next week, and could boost expectations that the Fed will ultimately hike four times in 2018 rather than the three projected by policy makers in December.

RELATED: Outsize gains in US employment show scope for economic growth

The outlook for manufacturing is solid, as lower taxes and a pickup in overseas markets are expected to spur business investment and exports. Continued strength in the labor market and rising household wealth should also support consumer demand for durable goods.

Other reports indicate manufacturing remains on solid ground: The Institute for Supply Management’s index showed U.S. factories expanded in February at the fastest rate since May 2004.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75% of total industrial production, accounts for about 12% of the U.S. economy.

Other Details

• Utility output declined 4.7% after rising 1.3% the prior month.

• Production of motor vehicles increased 3.9%.

• Mining production rose 4.3%, with oil and gas well drilling surging 11.6%.

• Production of consumer goods rose 0.1%, and output of business equipment climbed 1%.

• Machinery production increased 0.5%.