US output suffers surprise fall

US industrial production unexpectedly fell in March, delivering a shock after a recent run of bullish economic news.

Total US output fell 0.2% - against expectations of a 0.3% rise - while February's figures were revised up to a 0.8% gain, the Federal Reserve said.

"Unseasonably warm weather" had hit the utility sector, the Fed explained, pushing its output down 2.3%.

Elsewhere, factory production was flat after surging 1.1% the previous month, while mining output fell 0.3%.

Capacity in use at factories, utilities and mines also slipped in March, dropping to 76.5% from 76.7% the previous month.

Wall Street experts had expected capacity to rise to 76.8%.

'Bit of a blip'

The news is in stark contrast to recent data out of the US.

Jobs were created at a blazing pace in March after almost three years in the doldrums.

Together with strong retail sales and consumer prices, speculation has been fuelled that the Federal Reserve will raise short-term interest rates in the near future.

"I don't know what to make of (the output figures) other than it's a surprise," said economist Cary Leahy at Deutsche Bank Securities in New York, "and it goes against the grain of other information that we have on the manufacturing sector."

But Elisabeth Denison, senior economist at Dresdner Kleinwort Wasserstein looked on the positive side.

Although the data was "weak", she said, the previous two months had seen strong growth.

"For the quarter we are looking at quite healthy industrial production," she said.

Jay Felman at Credit Suisse First Boston agreed.

"Overall it is probably a bit of a blip, one negative month but the trend is still very positive," he said.