By Xavier Fontdegloria

Industrial production in the U.S. bounced back in March, partly reversing its weather-related decline in February, signaling that the sector is gaining momentum amid strong demand for factory goods but also hindered by supply bottlenecks.

Industrial production, a measure of factory, mining and utility output, rose at a seasonally adjusted 1.4% in March compared with February, the Federal Reserve said Thursday. The reading is the highest since July 2020, but misses forecasts from economists surveyed by The Wall Street Journal, who expected a 2.7% rise.

In February, industrial output fell by a revised 2.6% compared with a 2.2% drop previously estimated. That marked the first decline in factory production since September amid the harsh winter weather that hit the south central region of the country.

Manufacturing output--the biggest component of industrial production--increased by 2.7% in March from the prior month. The output of motor vehicles and parts rose 2.8% in March after falling 10% in February. Shortages of semiconductors continued to held down vehicle production, the Fed said.

The U.S. industrial sector is set to continue to be a bright spot for the economy amid healthy demand and healing business investment, but production will likely slow in the months ahead as the services sector fully reopens, economists say. Supply problems also are set to restrain the overall pace of activity.

Industrial production in March was 1% above the same month a year earlier, the data showed. In March 2020, the indicator edged down amid the first wave of the Covid-19 pandemic and its related factory shutdowns. Production was 3.4% below its pre-pandemic level.

Mining output increased 5.7% in March with oil and gas extraction accounting for most of the gain, the Fed said.

Utilities output decreased 11.4%, offsetting some of the gains elsewhere, as the demand for heating fell because of a swing in temperatures from an unseasonably cold February to an unseasonably warm March, the Fed said. The drop for utilities in March was the largest in the history of this index.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, increased to 74.4% in March. Economists expected a 75.7% reading. Capacity utilization for manufacturing rose 1.9 percentage points to 73.8%.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

April 15, 2021 09:55 ET (13:55 GMT)

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