Nation's production up at manufacturers; wholesale prices rise

WASHINGTON -- America's struggling manufacturers, which have seen hundreds of thousands of jobs evaporate during the recession, appear to be mounting a comeback.

Industrial production at the nation's factories, mines and utilities rose 0.4 percent in February, the strongest gain since the summer of 2000, right before the industrial slump began, the Federal Reserve said.

"At last, manufacturing is back in the black," declared Jerry Jasinowski, president of the National Association of Manufacturers.

A second report Friday showed that the U.S. economy's fledgling recovery isn't triggering inflation. Wholesale prices rose a modest 0.2 percent in February, while the core rate of inflation, which excludes volatile food and energy prices, was flat, the Labor Department said.

On Wall Street, the positive manufacturing report gave stocks a lift. The Dow Jones industrial average gained 90.09 points to close at 10,607.23.

The latest batch of economic news provided further evidence that the economy, jolted by the Sept. 11 terrorist attacks and a downturn that began in March 2001, is on the mend.

Manufacturing has been the weakest part of the bruised economy. If a turnaround in the sector is sustained, that might help power a potentially stronger economic rebound than Federal Reserve Chairman Alan Greenspan is anticipating, some economists said.

"Maybe he should start rethinking his slow recovery theory," said economist Joel Naroff of Naroff Economic Advisors.

Fed meets Tuesday

The Federal Reserve, which slashed interest rates 11 times last year to prop up the economy, meets Tuesday to discuss interest rate policy. Many economists expect the Fed will leave rates alone, just as it did in January. But some believe the Fed will change its current policy directive, which holds the door open to rate cuts in the future, to one that suggests the Fed may be staying on the sidelines.

Having cleared out excess stocks of unsold goods, which had piled up during the slump, factories are now in a position to boost production and possibly bring back some laid-off workers later in the year, some analysts said.

"Manufacturing has turned around 180 degrees," said economist Clifford Waldman of Waldman Associates.

The 0.4 percent increase in industrial production, the largest gain since June 2000, followed a 0.2 percent rise in January. That marked the first back-to-back increases since August and September 2000.

At factories, production rose 0.3 percent for the second straight month, lifted by gains in the production of steel, computers, semiconductors, paper, chemicals and tobacco. Automobile production dipped 0.2 percent in February, but still was an improvement over January's 1.6 percent drop.

Output at gas and electric utilities went up 2.7 percent last month with the return of more normal winter weather, after falling 0.3 percent in January. Mining production declined again, sinking by 0.7 percent in February.

The Fed's report is consistent with other recent economic data. The Institute for Supply Management reported that manufacturing activity had flashed a growth signal in February. Government reports show that orders to factories for big-ticket manufactured goods, such as cars, have been picking up.

In the inflation report, a 4.5 percent rise in gasoline prices, the largest advance since September, contributed to the increase in overall wholesale prices last month.

Although production cuts by oil-producing countries pushed energy prices up in the last two months, prices for gasoline and other energy products and still well below where they were a year ago.