U.S. industrial production rose 0.1% in February, the first back-to-back monthly gain in six months.

Capacity utilization remained unchanged at 75.6%. “Notably, capacity use in high-technology rose to its highest level since late 2001, a small step on the long road to recovery for the sector,” notes BMO Nesbitt Burns.

RBC says that the numbers are pretty close to consensus expectations. A slight slip in manufacturing production was offset by small rises in mining and utility production, it notes. And, it says that large capacity excesses remain in the U.S. industrial sector.

In a separate release, business inventories rose in line with expectations at just 0.2% in January. Nesbitt says that firms continue to run a very lean ship amid mounting economic uncertainty. “This followed a 0.7% run-up in December, and helped trim the inventory-to-sales ratio to 1.36 from 1.37 the prior month and 1.38 a year ago. If and when the bounce in spending comes, depleted inventories will be revived quickly,” it predicts.

RBC observes that the inventory gain was the ninth in a row, after contracting throughout 2001 and early 2002. “Because the retail sector drove the overall gain and retail sales contracted sharply in February, it is conceivable that retailers’ inventory management practices that have been caught by surprise will drive another increase in inventories when more recent data becomes available,” it says.

“Despite the two-month increase in production, factory activity remains sluggish, and the sector continues to shed workers. A weaker U.S. dollar will help, but the near-term outlook is clouded by war worries — and faltering auto sales,” concludes Nesbitt.