U.S. Factory Output Grows in February

U.S. industrial output grew by a stronger-than-expected 0.7% in February, as American firms operated at their fastest pace since August 2001, the Federal Reserve said Monday.

Another report from the National Assn. of Home Builders indicated that the housing sector -- one of the economy’s bulwarks in the climb out of the 2001 recession -- remained buoyant.

The builders’ group said its housing index, which measures members’ expectations for sales and buyer traffic, was steady at 64 in March, the same as in February. It credited “highly favorable financing conditions” stemming from low interest rates for supporting robust construction and sales activity.

February’s gain in industrial production exceeded Wall Street analysts’ expectations for a 0.4% increase. Capacity utilization, which measures how much productive capacity is in use, rose to 76.6% from 76.1% in January.

Factory production, which makes up more than four-fifths of overall industrial production, posted a 1% rise in February. Manufacturing capacity in use increased to 75.2%, its highest level since June 2001.

The report provided further evidence that the U.S. manufacturing sector -- hard hit by the 2001 recession and by companies’ reluctance to invest in new equipment afterward -- continues to recover, though at an uneven pace.

Earlier this month, the Labor Department said factory payrolls fell by 3,000 in February, their 43rd straight monthly decline. However, that was the smallest drop since a string of decreases began in August 2000.

“The gain in manufacturing activity was surprising in light of the results in the employ- ment report,” Michael Moran, chief economist with Daiwa Securities America, said in a research note.

Some of the gain, Moran theorized, was probably due to gains in productivity, or output per worker hour.