According to figures released March 16 by the Federal Reserve, factory production dipped in February as severe winter storms in Texas and the southern U.S. led to power outages and damaged factories. Total industrial production for February dropped by 2.2%, while manufacturing output dropped 3.1%. Capacity utilization for manufacturing slipped 2.3% to 72.3%.
The Federal Reserve said the severe weather forced petroleum refineries, petrochemical facilities, and plastic resin plants offline for most of the month due to electrical outages and damage: The chemical materials market group saw a loss of 14.5%. Without the winter storms, the Federal Reserve estimated that manufacturing as a whole would have only fallen about half a percentage point.
The loss of production ended a six-month trend that saw industrial production improve by about 1% each month since the third quarter of 2020. Despite manufacturing growth since the first half of 2020, overall production is still 4.2% below where it was in February 2020.
Specialized indexes for durable and nondurable manufacturing fell by 2.6% and 3.7%, respectively, while publishing and logging manufacturing fell 0.5%.
In durable manufacturing, the transportation industry saw output fall 8.3% as automakers confronted an industrywide shortage of computer chips. In the same sector, though, primary metals and aerospace manufacturing both recorded slight improvements.
Severe weather losses weighed heavily on nondurable manufacturing output due to its impact on Texas chemical operations. A Federal Reserve index for the chemicals industry fell 7.1% while its coal and petroleum index dropped 4.4%.
Emphasizing the outsized industrial impact of the severe weather spat, the Federal Reserve noted that utilities output jumped by 7.4% as the uncharacteristically cold weather in the southern state led to spikes in demand for power.
