(Bloomberg) -- Production at U.S. factories increased in March by the most in eight months as manufacturing returned to a path of solid growth following a weather-related setback in February.

The 2.7% increase in output followed a downwardly revised 3.7% decline in February, Federal Reserve data showed Thursday. Total industrial production, which also includes mining and utility output, rose 1.4% in March after a revised 2.6% decrease a month earlier.

The median estimate in a Bloomberg survey of economists called for a 3.6% monthly increase in factory production. The March reading was softer than forecast as automakers continued to deal with shortages of semiconductors.

The broader snapback in production follows on the heels of severe winter storms in February, which disrupted production and temporarily closed some plants. Output will probably remain firm in coming months against a backdrop of improving business confidence, trillions of dollars in government aid and a broader reopening economy.

The report showed increased factory output of machinery, metals, wood products, computers and apparel. Production of motor vehicles increased just 2.8% after a 10% slump a month earlier.

At the same time, producers continue to face persistent headwinds such as shipping challenges, supply shortages, rising costs of materials and difficulty finding labor. Factory capacity remains well below pre-pandemic levels.

Recent surveys reinforce the pickup in factory output. The Institute for Supply Management’s manufacturing index rose to its highest level since late 1983 in March.

April Surveys

Furthermore, regional Fed surveys out earlier on Thursday showed continued strength in April. A gauge of manufacturing in New York rose in April to the highest level since 2017, while the Philadelphia Fed’s general activity index was the strongest since 1973.

Total industrial production is closing in on pre-pandemic levels and is down about 3% from February 2020.

A separate report Thursday from the Commerce Department showed retail sales accelerated in March by the most in 10 months as business reopenings, increased hiring and a fresh round of stimulus checks emboldened shoppers.

Meanwhile, Labor Department data showed initial state jobless claims fell by almost 200,000 last week, plunging to a fresh pandemic low.

Digging Deeper

  • Manufacturing capacity utilization rose to 73.8%, while total industrial capacity increased to 74.4%
  • Excluding motor vehicle and parts production, manufacturing output also advanced 2.7%
  • Utility output slumped a record 11.4% in March as temperatures moderated from an unseasonably cold February, the Fed said
  • Mining output increased 5.7% as oil and gas extraction accounted for most of the gain

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