Factory Output Jumps 1.2 Percent But Consumer Prices Increased Just 0.2 Percent In February

The nation’s factories regained their footing in February after stumbling through much of 1995. Output increased by the largest amount in more than eight years and without fueling inflation.

The Federal Reserve reported Friday that output at U.S. factories, mines and utilities shot up 1.2 percent, the steepest gain since it jumped 1.3 percent in October 1987 and the third advance in the last four months.

At the same time, the Labor Department reported that consumer prices edged up just 0.2 percent, half of the 0.4 percent jump in January when severe winter temperatures heated demand for energy.

The Fed report also contained little sign of any future inflationary spiral. It said the nation’s industries were operating at 82.9 percent of capacity, with little sign of production bottlenecks that could boost prices.

“I certainly do not think the production and capacity utilization numbers imply any inflationary pressure,” contended Sung Won Sohn, an economist with the Norwest Corp. in Minneapolis. “That was confirmed by this morning’s CPI report. If anything, I think the inflation number is overstated.”

The Fed said part of the February surge in output was a bounce back from the January blizzard that closed many factories in the eastern part of the nation. And one-third of the growth was due to the end of the Boeing Corp. strike, it added.

The January decline was less than previously thought. The report said output fell 0.4 percent, rather than the Fed’s 0.6 percent initial estimate.