Weak U.S. factory data suggest softer economic growth

Mon Mar 16, 2015 12:40pm EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. manufacturing output fell in February for the third straight month as the production of automobiles and a range of goods tumbled, the latest indication of slower economic growth in the first quarter.

Activity has softened in recent months, constrained by a harsh winter, strong dollar and lower crude prices, which have forced companies in the oil field to either postpone or cut back on capital expenditure projects. Weak demand overseas and a now-settled labor dispute at U.S. West Coast ports also was a drag.

"This is a very toxic cocktail for U.S. manufacturing. We could see some of these headwinds lasting for a few months, the first half of the year will be quite difficult," said Thomas Costerg, an economist at Standard Chartered Bank in New York.

The weak factory data came ahead of the Federal Reserve's policy meeting on Tuesday and Wednesday, where economists expect officials at the U.S. central bank to drop the phrase "patient" from their so-called forward guidance on interest rates.

Factory production slipped 0.2 percent last month after declining 0.3 percent in January, the Fed said on Monday.

The report joined dour retail sales, construction and housing starts data, which recently prompted economists to slash their first-quarter GDP growth estimates to as low as a 1.2 percent annualized pace. The economy grew at a 2.2 percent rate in the fourth quarter.

Economists had forecast manufacturing output edging up 0.1 percent last month.

In February, auto production fell 3 percent. There were also declines in the output of machinery, primary metals, computer and electronic products, electrical equipment, appliances and components, and apparel and leather goods.   Continued...

Chevrolet Cruze chassis move along the assembly line at the General Motors Cruze assembly plant in Lordstown, Ohio July 22, 2011.  REUTERS/Aaron Josefczyk