Manufacturing got off to a weak start this year as motor vehicle assembly tumbled, but a rebound in factory activity in New York state this month suggested the decline would be temporary.
Manufacturing output fell 0.4 per cent in January after rising 1.1 per cent in December, the Federal Reserve said on Friday. It followed two months of solid gains and largely reflected a drop in auto production.
"Given that most of the weakness was due to the give-back in motor vehicle production after the 11 per cent surge in activity during the last two months of last year, we expect this retreat in industrial output to be temporary," said Millan Mulraine, senior economist at TD Securities in New York.
In a separate report, the New York Fed said its "Empire State" general business conditions index rose to 10.0 from -7.8 the month before. February's index showed the first growth in the sector since July and the best performance since May 2012.
The rebound was driven by new orders, where the index was at its highest since May 2011. Economists said the pick-up in activity likely reflected recovery from Superstorm Sandy, which struck the East Coast in late October.
"Growth in the current quarter could get a boost from rebuilding efforts in the region," said Joseph LaVorgna, chief US economist at Deutsche Bank Securities in New York