US manufacturing output accelerates in February

WASHINGTON (Reuters) - U.S. manufacturing production increased more than expected in February, boosted by a surge in motor vehicle output, but tariffs are casting a shadow on the nascent factory recovery.

Factory output jumped 0.9% last month after an upwardly revised 0.1% gain in January, the Federal Reserve said on Tuesday. Economists polled by Reuters had forecast production rebounding 0.3% after a previously reported 0.1% dip.

Production at factories increased 0.7% on a year-on-year basis in February. Manufacturing, which accounts for 10.3% of the economy, has been recovering as the U.S. central bank started cutting interest rates in September.

President Donald Trump's often chaotic tariffs campaign, which has triggered a trade war, is seen undermining the sector. Reflecting back to Trump's first term, J.P. Morgan economists noted that "no long-term improvement in manufacturing was observed as a result of the 2018 tariffs."

The U.S. central bank is expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range on Wednesday, having reduced it by 100 basis points since September, and continue to assess the economic impact of the Trump administration's policies.

Motor vehicle and parts output accelerated 8.5% after declining for two straight months. Durable manufacturing production increased 1.6%, also boosted by rises in the output of other long-lasting goods. Nondurable manufacturing production rose 0.2% as gains in chemicals output offset a decline in food, beverage and tobacco products.

Mining output rebounded 2.8% after decreasing 3.2% in January. Utilities production fell 2.5% as a rise in temperatures lowered demand for heating. Utilities production had shot up 6.1% in January amid frigid weather.

Industrial production increased 0.7% after climbing 0.3% in January. It surged 1.4% year-on-year in February.

Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, increased to 78.2% from 77.7% in January. It is 1.4 percentage points below its 1972–2024 average. The operating rate for the manufacturing sector rose 0.6 percentage point to 77.0%. It is 1.2 percentage points below its long-run average.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)