(Bloomberg) — Factory production in the U.S. declined in February for a third consecutive month, signaling cutbacks in manufacturing will hold back economic growth this quarter.
The 0.2 percent decrease at manufacturers followed a 0.3 percent drop in January that was initially estimated as a gain, figures from the Federal Reserve in Washington showed Monday. Total industrial production, which also includes mines and power plants, climbed 0.1 percent, propelled by a record surge in utility use as temperatures plummeted.
Delays at West Coast ports have probably disrupted supplies, while sluggish growth in foreign markets and a rising dollar that makes American products more expensive may be crimping demand. U.S. consumer spending, supported by job and wage gains, will be needed to underpin activity at factories, which are often considered economic bellwethers.
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“We’re in a soft patch,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, who correctly forecast the increase in the overall production gauge. As the U.S. moves into the spring and the bottlenecks caused by the port strikes abate, “the manufacturing sector might perk up a little again. I don’t think too much of this current softness should be extrapolated forward.”
Another report Monday showed manufacturing in the New York region grew this month at a slower pace than projected.
There were indications that the housing market is also struggling. Confidence among residential builders unexpectedly fell in March to an eight-month low as fewer prospective buyers visited projects, figures from the National Association of Home Builders/Wells Fargo showed Monday.
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Stocks rose as the dollar declined and the lower-than-forecast manufacturing data fueled uncertainty on the timing of the Fed’s first interest rate increase. The Standard & Poor’s 500 Index climbed 0.9 percent to 2,071.13 at 10:48 a.m. in New York. The yield on the benchmark 10-year note fell to 2.08 percent from 2.12 percent on March 13.
Manufacturing, which makes up about 75 percent of total production, was forecast to be little changed, according to the median forecast in a Bloomberg survey. January had previously been reported as a 0.2 percent increase.
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Total industrial production was projected to rise 0.2 percent, with estimates ranging from a drop of 0.1 percent to a 0.8 percent gain, according to the survey of 80 economists. Output in January fell 0.3 percent compared with a previously reported 0.2 percent increase.
Capacity utilization, which measures the amount of a plant that is in use, declined to 78.9 percent in February from 79.1 percent.
Utility output soared 7.3 percent last month, the most since records began in 1972.
The eastern U.S. saw below-normal temperatures from Atlanta to New York and record snowfalls in New England. The National Oceanic and Atmospheric Administration’s data showed February was the snowiest month on record for Boston, while Chicago, Buffalo and Cleveland had their coldest February on record.
Mining production, including oil drilling, fell 2.5 percent in February, the biggest decline in four years, after a 1.3 percent drop the prior month.
The plunge in fuel prices that started last year has led oil producers such as Sanchez Energy Corp. to curb investment plans. The Houston-based company said affirmed this month it plans to spend $600 million to $650 million on capital, down from the $850 million to $900 million it expected in November.
“What we’re really looking for is more of an overarching stability on the cost side and a settlement of oil in the coming months,” Chief Operating Officer Christopher Heinson said in a March 3 conference call. “The entire cost structure has shifted.”
The decline in manufacturing output in February reflected a 3 percent drop in production of motor vehicles and parts. Automakers had said the work stoppage at West Coast ports, which has now been resolved, led to a shortage of some supplies.
Today’s report is consistent with data from the Institute for Supply Management that showed manufacturing expanded in February at the weakest pace in a year, limited by slow growth abroad and a work slowdown at West Coast ports. The group’s factory index decreased to 52.9 for February, the lowest since January 2014, after 53.5 the prior month.
The economy may grow at a 2.4 percent annualized rate in the first quarter after expanding at a 2.2 percent pace in the three months ended December, according to the median forecast in a Bloomberg survey of economists.
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