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Manufacturing Production Strongest in Three Years

Posted by Joseph Trevisani on Mar 17, 2017 12:25:26 PM

The output of America's factories rose for the sixth straight month in February and saw the best back to back increases in three years.

Production in the nation’s manufacturing sector climbed 0.5 percent last month and January’s gain more than doubled upon revision from 0.2 percent to 0.5 percent, reported the Federal Reserve on Friday

Manufacturing comprises about 75 percent of total industrial production and together these two months have been the strongest since February and March 2014, also the start of the last six month positive run for factory output. Analysts had forecast a 0.4 percent gain for February.  Factory output accounts for about 12 percent of U.S. economic activity.

Overall industrial production which includes mining and utilities was flat for the month as unseasonably warm weather in much of the country reduced demand. Economists had predicted a 0.2 percent increase. The January output was adjusted higher to -0.1 percent from  -0.3 percent. 

Reviving optimism among consumers, an end to inventory reductions and the prospect of regulatory relief may have encouraged business to increase production and spending.  Levels of consumer and business confidence have surged since the November presidential election.

Utility output fell 5.7 percent in February after dropping 5.8 percent the prior month. Nationwide temperatures last month were, according to National Oceanic and Atmospheric Administration records which go back about 150 years, the second warmest on record, though the actual increase was very small. 

Resource extraction, primarily mining and oil drilling rose 2.7 percent in February as production and exploration of shale oil surged. The number of operational drilling rigs rose to 768 last week the most since November 2015 reported Baker Hughes Inc. 

Capacity utilization, which gauges the amount of the U.S. industrial plant that is in operation dropped slightly to 75.4 percent In February from 75.5 percent the previous month, according to the Fed data. Since the financial crash and recession the utilization of the national productive capacity has remained far below its historical average.

Factory use rose to 75.6 percent last month, the highest since October 2015. There were gains in the production of business equipment, fashioned metals, machinery, paper, plastics, construction supplies and rubber.  The output of consumer goods declined 0.4 percent in February while automobile production climbed 0.8 percent after declining the same amount in January. 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Thomson/Reuters

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