US factory output increases in February for a second month; consumer sentiment ebbs in March
OUTPUT at US factories increased unexpectedly in February for a second month, representing a respite for a manufacturing sector that has been sluggish amid rising economic uncertainty.
US consumer sentiment fell for the first time in four months in March, though households expected inflation to subside over the next 12 months and beyond.
The 0.1 per cent gain in factory production last month followed an upwardly revised 1.3 per cent advance in January, according to Federal Reserve data released on Friday (Mar 17). Including mining and utilities, total industrial output was unchanged in February.
The median forecast in a Bloomberg survey of economists called for manufacturing production to decline 0.3 per cent and for total output to rise 0.2 per cent.
Consecutive gains in goods production suggest firmer economic growth in the first quarter, helped by improving supply chains and a rebound in orders. Nonetheless, the outlook for factory activity will be tested by rising borrowing costs, sluggish overseas economies and elevated inventories.
The figures follow a separate Institute for Supply Management report earlier this month that showed a gauge of factory activity improved for the first time in six months despite remaining largely depressed.
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The Fed data showed capacity utilisation at factories, a measure of potential output being used that can correlate with inflation pressures, eased to 77.6 per cent.
The gain in manufacturing output last month reflected increases in computers and electronics, chemicals and wood products. Motor vehicle output fell for the third time in the last four months.
By market group, output of consumer goods increased, reflecting a gain in energy. Production of consumer durable goods, such as autos, fell.
Utility output rose 0.5 per cent, while mining fell 0.6 per cent. Oil and gas well drilling slid 3.1 per cent.
Separately, the University of Michigan’s preliminary March reading on the overall index of consumer sentiment came in at 63.4, down from 67 in the prior month. Economists polled by Reuters had forecast a preliminary reading of 67.0.
“This month’s decrease was already fully realised prior to the failure of Silicon Valley Bank, at which time about 85 per cent of our interviews for this preliminary release had been completed,” said Surveys of Consumers director Joanne Hsu.
The decline in sentiment was concentrated among lower-income, less-educated and younger consumers, as well as consumers with the top tercile of stock holdings, Hsu added.
The survey’s reading of one-year inflation expectations fell to 3.8 per cent, the lowest since April 2021, from 4.1 per cent in February. Its five-year inflation outlook dropped to 2.8 per cent, falling below the narrow 2.9-3.1 per cent range for only the second time in the last 20 months. BLOOMBERG, REUTERS
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