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Published: Friday, 3/16/2012

U.S. factory output rose modestly in February after best 2-month rise since 1998


WASHINGTON — U.S. factories stepped up production in February for the third straight month, helping the economy recover and driving the best job growth since the recession ended.

The Federal Reserve said Friday that the output of the nation's factories rose 0.3 percent last month. That followed even stronger increases in January and December, which combined for the best two month stretch since 1998.

Overall industrial production, which includes output by mines and utilities, was unchanged. Mining activity declined sharply and utilities were flat.

Separately, inflation was mostly mild in February outside of a sharp jump in gas prices. The Labor Department said the consumer price index increased 0.4 percent. Gas prices rose 6 percent to account for most of the gain.

Food prices were unchanged for the first time in 19 months. And excluding food and energy, so-called "core" prices rose just 0.1 percent.

Factory output has risen 17.4 percent since the depths of the recession in June 2009. It remains 6.7 percent below its pre-recession peak, reached in December 2007.

Growth at U.S. factories was a little slower in February because auto production edged lower after big gains in December and January. Manufacturers made more electronics, energy products and electrical equipment.

Still, manufacturing has strengthened substantially since last summer, when it faltered because of global supply disruptions caused by the Japan earthquake and tsunami. Factories are benefiting from strong auto sales and growing business investment in machinery and other equipment. The increased demand has led to more jobs.

The government said last week that manufacturers added 31,000 jobs in February. And factories have added 227,000 jobs over the past year. The number of hours worked by factory employees also rose 0.9 percent last month, according to Capital Economics.

Two regional surveys released on Tuesday showed factories in the Northeast kept growing this month at a healthy pace and are hiring more workers. The surveys, conducted by the Federal Reserve banks of Philadelphia and New York, hit their highest readings since April 2011 and June 2010, respectively.

Threats to factory growth remain. Rising fuel prices are increasing the cost of transporting goods to consumers. Europe's financial turmoil could weaken demand for U.S. exports. And another year of weak pay increases could force consumers to cut back on spending.

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