BUSINESS

Industrial production rises 0.4 per cent in March as auto factories, power plants surge

04/16/2013 09:21 EDT | Updated 06/16/2013 05:12 EDT
WASHINGTON - U.S. industrial output rose in March as cold weather kept utilities busy generating heat and a surge in auto production helped offset broader weakness in manufacturing.

Production at the nation's factories, mines and utilities rose 0.4 per cent in March from February, the Federal Reserve said.

Utility output rose 5.3 per cent, as Americans had to use more heat during a colder-than-normal March.

And production of autos and auto parts surged 2.9 per cent, the second straight monthly gain. Auto production is up 10.2 per cent over the past year. Car sales have risen steadily this year after reaching a five-year high in 2012.

Overall factory production slipped 0.1 per cent, dragged down by falling metal production and clothing. Still, consumer goods climbed 1.1 per cent, matching February's gain. And business equipment showed a slight increase.

For the January-March quarter, total industrial production as well as manufacturing are both up over 5 per cent annualized, noted Jennifer Lee, senior economist at BMO Capital Markets

That's "the best reading in over a year," she said.

Still, recent reports from the nation's factories have been disappointing. The Federal Reserve Bank of New York reported Monday that manufacturing growth in the New York slowed this month. And a private survey from the Institute for Supply Management showed that manufacturing nationwide expanded more slowly in March than it did in February, held back by weaker growth in production and new orders.

The U.S. economy also shed 3,000 manufacturing jobs in March and factory employees worked fewer hours.

Output was slowed in March after U.S. factories saw less demand in February for long-lasting goods that signal business investment plans. Still, the decline followed a gain in January that was the biggest in nearly three years.

Analysts said that when averaging the two months, business investment orders showed a solid increase for the January-March quarter. That's among the reasons some are predicting growth could increase to around 3 per cent in the first quarter, up from 0.4 per cent in the previous three months.

Many predict growth will slow again in the April-June quarter, as the impact of higher Social Security taxes and government spending cuts begin to weigh on the economy. Both threaten to slow factory activity in the spring and summer.