Washington – A strong increase in auto output boosted US factory production in February 2013, the latest sign that manufacturing is helping drive economic growth after lagging for much of 2012.
Factory output rose a seasonally adjusted 0.8% in February from January, after falling 0.3% in the previous month, the US Federal Reserve said.
The biggest gain was in autos and auto parts, where production increased 3.6% after falling 4.9% in January. Car sales have risen steadily this year after reaching a five-year high in 2012.
Overall industrial production, which includes mining and utilities, rose 0.7% in February. That is the most in three months. Utility output jumped 1.6% while mining output, which covers oil and gas drilling, fell 0.3%, the third straight decline.
The recovery in home construction and increased business investment in machinery and other goods are also boosting output. Production of construction supplies, which includes steel, cement and wood products, rose 1.5%. That was the fourth straight solid gain.
Factories also cranked out more industrial machinery, appliances, and furniture.
“Growth has clearly picked up,” Jim O’Sullivan, chief US economist at High Frequency Economics, said in a note to clients. “This is another positive sign” for the economy in the January-March quarter.
O’Sullivan forecasts that growth will jump to a 3% annual rate in the first quarter, after barely expanding in the final three months of 2012.
Jonathan Basile, an economist at Credit Suisse, said the healthy increase in output suggests manufacturers will need step up hiring in the months ahead. Factory job gains could rise to 20,000 a month, up from average gains of 13,000 in the past three months.
The report adds to recent signs that manufacturing is picking up.
A closely watched index of US manufacturing activity increased in February for the third straight month. Big increases in new orders and production pushed the Institute for Supply Management’s index to its highest level in 20 months.
New car and truck sales rose 4% in February from a year earlier to an annual pace of 15.4 million. That’s a big improvement from sales of only 10.4 million in 2009. It’s still short of the pre-recession peak of 17 million in 2005. Auto makers are expected to have boosted output last month to keep up with the sales.
Increasing factory output is contributing to an improved outlook for the economy this year. Americans are spending more, despite higher Social Security taxes and a sharp increase in gas prices. Retail sales rose in February at a healthy pace.
The job market is also gaining steam. Employers have added more than 200,000 jobs per month in the past four months, nearly double the average last spring. That’s pushed the unemployment rate down to a four-year low of 7.7%.
As a result many economists are more optimistic about growth in the January-March 2013 quarter. Joseph LaVorgna, chief economist at Deutsche Bank, raised his forecast for first quarter growth to an annual rate of 3%, up from only 1.5%.