/www.bloomberg.com/ By Vince Golle
Washington, (Bloomberg) -- U.S. industrial production rose in February for the third month in four, led by an increase at utility plants and mines, the Federal Reserve reported. Manufacturing decreased as automaking slowed.
The 0.1 percent rise in production at factories, mines, and utilities followed a 0.8 percent increase in January, the central bank said. The proportion of industrial capacity in use was unchanged from January at 75.6 percent.
Capacity in use is close to an 18-year low, so companies have little reason to buy equipment and upgrade plants. At the same time, factories are producing just enough to meet demand, which has been restrained by war fears and rising energy costs. Consumer spending, two-thirds of the economy, fell in January for the first time in four months.
``Excess capacity continues to provide a powerful drag on business investment and economic growth,'' said Tim Rogers, chief economist at Briefing.com in Boston, before the report. ``A sustained upturn in production waits for stronger demand'' for equipment.
No change was forecast for February industrial production, according to the median of 60 estimates in a Bloomberg News survey.
Capacity utilization reached an 18-year low of 74.6 percent in December 2001. During the 10-year expansion that ended in March 2001, plant use averaged 82 percent.
Auto Production Falls
Work at factories, which accounts for almost 90 percent of industrial production, fell 0.1 percent last month after rising 0.6 percent in January.
Production of consumer durable goods, which includes automobiles, furniture and electronics, decreased 1.4 percent after increasing 2.2 percent the previous month.
February's fall was led by a 2.2 percent drop in the assembly of vehicles and parts. Vehicle manufacturing had risen 4.3 percent in January as auto companies replenished dealer lots after the best December on record.
Auto sales slowed to a 16.2 million annual rate in January from December's 18.3 million pace. In February, the rate cooled to 15.4 million units, industry data show.
Ford Motor Co. said yesterday it will cut North American production 17 percent, to 980,000 cars and trucks, a decrease from 1.18 million in the 2002 quarter. General Motors Corp., the world's largest automaker, said earlier this month that it plans to cut second-quarter production in North America by 10 percent.
Business Equipment
``When I talk to CEOs in other industries, I don't get a lot of favorable signs about the economy,'' said Rick Wagoner, GM's chief executive officer, in a March 4 interview on Bloomberg Television.
Business equipment production, which includes transportation and information processing equipment, was unchanged in February after rising 0.9 percent the previous month. Production of computers and other office equipment rose 0.2 percent after a gain of 2.1 percent.
Slowing production shows that companies ``are pretty nervous at this point in the recovery,'' said Alexander Cutler, chairman and chief executive of Eaton Corp., in a March 3 interview on Bloomberg Television.
Manufacturing continues to bleed jobs. Factories shed 53,000 jobs in February, the 31st straight month of declines, Labor Department figures show.
Industrial production is forecast to rise 2.1 percent in 2003, the first increase in two years, according to the latest Blue Chip Economic Indicators survey of economists. That's down from the prior forecast of 2.5 percent. The Institute for Supply Management's factory index registered a reading of 50.5 in February, the lowest in three months.
Utility production rose 1.3 percent in February after increasing 4 percent a month earlier, today's report showed. The average temperature in February was 33.3 degrees Fahrenheit, 1.2 degrees cooler than the 1895-2003 average, according to the government. In the Northeast, snowfalls were the heaviest in seven years. January's average temperature was 32.9 degrees.
Production at mines rose 1 percent after falling 1.8 percent in January.