Industrial production in factories, mines, and utilities jumped 1% in February, the biggest one-month gain since late 2005. Exceptionally cold weather accounted for a 6.7% increase in the utility sector, but large percentage increases were also recorded in the production of motor vehicles, high tech equipment, and home electronics. Plant capacity utilization increased to 82%. This metric bottomed out below 74% in the 2001 recession and rose steadily until it peaked last summer at 82.4%. It dropped below 82% through the fall and winter before picking up again in February. The Consumer Price Index increased 0.4% primarily because of higher energy and food costs. Core CPI, which excludes food and energy, was up 0.2% for the month 2.7% on a year-over-year basis. Clothing prices rose for the third consecutive month, and medical costs rose 0.5% following a 0.8% rise in January.
Every month-to-month data series contains little blips here and there, and today's data is no exception. Yes, February was very cold and apparel costs jump around a lot. But taken as a whole, today's numbers could hardly reinforce more clearly the Fed's basic position: The economy continues to grow at a moderate pace and inflation is a bit higher than it should be.
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