Reports stir hopes of US factory revival

US manufacturing showed signs of revival on Tuesday, as reports from the Federal Reserve and one of its regional banks showed gains in January and early February.
The Federal Reserve said its gauge of activity at American factories, mines and utilities rose a sharp 0.8 percent in January, led by a weather-related gain in utilities use. Factory output - more than four-fifths of total production - rose 0.3 percent, its fifth straight monthly rise.
In a separate report, the Federal Reserve Bank of New York said its two-year-old Empire Manufacturing Survey's business conditions index rose to a record 42.05 in early February from a revised 38.85 in January.
The two reports may help ease worries over the embattled US factory sector, which has yet to recover from the 2001 recession. Manufacturers have trimmed payrolls for 42 straight months, with about 2.8 million factory jobs lost since President George W. Bush took office in January 2001.
Financial markets started the trading day higher after the data's release. The Dow Jones industrial average was up 63.11 points at mid-morning, while the Nasdaq composite was up a by about 18 points.
January's cold weather helped push overall industrial production up, even as manufacturing gained. Utility output climbed a hefty 5.2 percent while natural gas production increased by 7.0 percent, its biggest jump since February 2003, according to the Fed.
Still, the gain in manufacturing sped up the pace at which factories operated in January. The capacity use rate rose to 74.6 percent in January, its highest reading since August 2001.
December's overall production and capacity use figures were revised downward somewhat in Tuesday's report. Output was revised to a flat reading from the initially reported 0.1 percent advance while capacity utilisation was reported at 75.6 percent, down from the original reading of 75.8 percent.
"The gains within the manufacturing sector were fairly broad-based though moderate," said Stephen Stanley, an economist with RBS Greenwich Capital Markets.
In its monthly survey of manufacturing in the state, the New York Fed said nearly all its respondents indicated they expected conditions to be the same or better in six months.
The new orders' index rose to 34.94 in February from a revised 34.82 in January. The employment index dipped almost 8 points but was still in positive territory at 16.5, according to the bank.
The New York Fed index is one of several measures compiled by the Fed's 12 regional banks that analysts watch to gauge factory activity.