WASHINGTON—American industry rebounded last month as the United States recovered from an unusually frigid February. Industrial production—including output at factories, mines and utilities—rose 1.4 percent in March, reversing a 2.6 percent drop in February, the Federal Reserve reported Thursday. The increase was about half the surge economists had expected as federal aid flows into the economy and the rollout of vaccines encourages a return to normal business activity. Output was limited by disruptions in the supplies of key components. “Clearly there is lots of demand out there,” Jennifer Lee, senior economist at BMO Capital Markets, said in a research note. “It is up to manufacturers to pull up their socks and meet the demand.” Output rose 2.7 percent at factories. Auto production increased 2.8 percent last month after plunging 10 percent in February. Automakers were constrained for the past two months by a shortage of computer chips. Production climbed 5.7 …