US Factory Output Flat to Unchanged

US Factory Output Flat to Unchanged

US manufacturing output was flat to unchanged in March after 2 straight monthly decliners.

The Federal Reserve said Tuesday manufacturing production last month was restrained by weak motor vehicle and wood products output.

Data for February was revised up to show output at factories falling 0.3% instead of declining 0.4% as previously reported.

Economists polled by Reuters had forecast manufacturing output edging up 0.1% in March.

Production at factories dropped at a 1.1% annualized rate in Q-1. That was the 1st Quarterly drop since Q-3 of Y 2017 and followed a 1.7% pace of increase in the October-December frame.

Excluding motor vehicles and parts, manufacturing output rose 0.2% in March, lifted by increases in the production of primary metals, and computer and electronic products, after falling 0.5% in February.

Motor vehicles and parts production dropped 2.5% last month after increasing 2.3% in February. An inventory overhang in the automobile sector is weighing on production, contributing to factory employment declining in March for the first time since July 2017.

The outlook for the manufacturing sector, which accounts for about 12% of the economy, is soft.

A survey from the New York Fed Monday showed a measure of future business activity in New York state dropped to a more than three-year low in April, with companies downbeat about new orders and shipments.

Activity is also being hobbled by a trade dispute between the United States and China as well as by last year’s surge in the USD and softening global economic growth, which are hurting exports.

The softness in manufacturing is in tandem with a moderation in the broader economy.

The flat manufacturing output in March, together with a 0.8% drop in mining, lead to a 0.1% dip in industrial production. Industrial output edged up 0.1% in February. It fell at a 0.3% rate in Q-1 after rising at a 4.0% pace in Q-4.

  • Mining production was unchanged in February.
  • Crude Oil & Nat Gas well drilling rebounded 0.3%.
  • Utilities output gained 0.2% in March.

Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, slipped to 76.4% last month, the lowest in a year. Overall capacity use for the industrial sector fell to 78.8% from 79.0% in February.

Note: Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy for how far growth has room to run before it becomes inflationary.

Stay tuned…

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