Last updated: February 15, 2013 4:02 pm

US manufacturing data paint mixed picture

US industrial production shrank in January after the biggest back-to-back gain in three decades, while factory activity in the New York region unexpectedly expanded in February, in a mixed picture of the country’s manufacturing sector.

Output at factories, mines and utilities fell 0.1 per cent last month after a 0.4 per cent gain in December, figures from the Federal Reserve showed on Friday. While economists had expected a 0.3 per cent rise in January, revised data for November and December showed the biggest two-month gain since 1984.

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Separately, the Federal Reserve Bank of New York’s general economic index – the earliest measure of monthly performance for the US manufacturing sector – climbed to an especially strong rate of growth at 10, the highest since May 2012, from minus 7.78 in January and minus 7.3 in December. Economists surveyed by Bloomberg had expected a level of minus 1.75.

Both sets of data point to a recovery in manufacturing after a slowdown in the latter half of 2012 as fiscal uncertainty at home and lacklustre demand abroad caused many US companies to pull back on investment.

A weak manufacturing sector, which makes up about 12 per cent of the US economy and about 6 per cent of New York’s economy, had been holding back growth and had overshadowed positive momentum in housing and consumer spending.

Another release showed consumer confidence in the US rose in February to a three-month high. A jump in property values, a slow and steady improvement in the jobs market and stocks at five-year highs have spurred spending by Americans.

The weakness in the headline industrial production number was due almost exclusively to the 3.2 per cent drop in automobile and parts production in January, after a 2.9 per cent gain in the previous month.

“Given that most of the weakness in the report was due to the giveback in motor vehicle production after the 11 per cent surge in activity during the last two months of last year, we expect this retreat in industrial output to be temporary,” said Millan Mulraine, strategist at TD Securities.

Mining activity was also a driver of weakness, dipping 1 per cent after being little changed the prior month. Utility production rose 3.5 per cent after falling 4.5 per cent the month before, due in large part to the increased demand for heating as a result of the cold snap.

The decline in output sent capacity utilisation – which measures the amount of a plant that is in use – down to 79.1 per cent from a four-year high of 79.3 per cent in December.

Meanwhile, the Empire State’s new orders gauge increased to 13.3 in February, the highest reading since May 2011, from minus 7.2 in January.

The index covers production in New York, northern New Jersey and southern Connecticut. A positive reading indicates month-to-month growth in general business conditions.

The shipments component rose to 13.1 from minus 3.1 the previous month while the measure of factory employment gained to 8.1, the highest since August, from minus 4.3.

The indicator of expectations about general business conditions for the next six months rebounded to 33.07 – the highest level in 10 months.

Other data showed the Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 76.3 this month from 73.8 in January. Economists surveyed by Bloomberg had forecast a level of 75.

The survey questions 500 households each month about their financial conditions and attitudes to the economy. Consumer sentiment is directly related to the strength of consumer spending, which accounts for more than two-thirds of the economy.

The current economic conditions gauge rose to 88 from a six-month low of 85 in January. The consumer expectations component which more closely projects the direction of consumer spending, increased to 68.7 from 66.6 last month.

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