Industrial Production Unexpectedly Slumped in February

Industrial production in the U.S. fell 2.2 percent in February, the Federal Reserve reported Tuesday.

The Fed said severe winter weather in the south central region of the country in mid-February accounted for the bulk of the decline.

“Most notably, some petroleum refineries, petrochemical facilities, and plastic resin plants suffered damage from the deep freeze and were offline for the rest of the month,” the Fed said. “Excluding the effects of the winter weather would have resulted in an index for manufacturing that fell about 1/2 percent and in an index for mining that rose about 1/2 percent. Both indexes would have remained below their pre-pandemic.”

The results were far worse than expected. Economists surveyed by Econoday had forecast a 0.5 percent gain, with estimates ranging from a o.4 percent loss to a 1.6 percent gain.

Manufacturing output fell 3.1 percent, below the consensus estimate for a 0.6 percent gain. Capacity utilization tumbled to 73.8 percent, highlighting how the Texas freeze hit the industrial sector.

The output of motor vehicles and parts fell 8.3 percent, the fourth decline in the past six months. This sector has been impacted by a shortage of computer chips.

Mining output fell 5.4 percent. Utility output jumped 7.4 percent on elevated demand for heating.

Most economists see the February slump as temporary and due to severe weather rather than a sign that the broader economy faltered in the month. Manufacturing has recovered more quickly than expected, becoming a bright spot in an economy beset by covid and lockdowns.

January’s industrial production number was revised up to 1.1 percent from an initial read of 0.9 percent. Manufacturing output was revised up to 1.2 percent from 1.0 percent.