The Federal Reserve announced on Tuesday that the US industrial output dropped 2.2% in February, a lower figure than anticipated due to winter storms that shut down factories across the country. The central bank stated that the extreme winter weather in the south-central region of the country in mid-February accounted for the bulk of the production declines for the month.
Manufacturing production fell 3.1% in the month, while mining output dropped 5.4 percent, according to the survey. However, as compared to January, utility production improved by 7.4%. In addition, total production is already 4.2% lower than it was in February 2020. In Texas, the country’s second most populous state, severe and rare winter storms shut down businesses and knocked out electricity.
“Most importantly, several petroleum refineries, petrochemical facilities, and plastic resin plants were affected by the deep freeze and were forced to shut down for the remainder of the month,” according to the Fed. Manufacturing would have dropped just 0.5% without the storm, according to the central bank, while mining would have risen by the same amount.
According to Oxford Economics’ Oren Klachkin, February’s drop was the worst since the COVID-19 pandemic started last year, and was fuelled in part by a global semiconductor shortage. However, he expects government stimulus spending and the implementation of COVID-19 vaccines to restore growth in the coming months, though the pace will slow as the service sector reopens later this year.
“Stable industrial sector growth is expected to be fueled by healthy products demand, healing business investment, and historic fiscal stimulus”, he said.
