US manufacturing output dips in March

[WASHINGTON] US factory production unexpectedly fell in March after two straight months of solid gains, weighed down by decreases in the output of motor vehicles and a range of other goods.

Manufacturing output dipped 0.1 per cent last month after an upwardly revised 0.4 per cent increase in February, the Federal Reserve said on Thursday (Apr 16). Economists polled by Reuters had forecast production at factories would gain 0.1 per cent after a previously reported 0.2 per cent rise in February.

Production at factories advanced 0.5 per cent on a year-over-year basis in March. It grew at a 3.0 per cent annualised rate in the first quarter, rebounding from the fourth quarter’s 3.2 per cent pace of decline.

Manufacturing, which accounts for 10.1 per cent of the economy, showed signs of recovery after being hammered by President Donald Trump’s import tariffs. But the US-Israeli war with Iran has sent oil prices surging by more than 35 per cent, which could stifle the recovery.

The Fed’s “Beige Book” report noted that the conflict “was cited as a major source of uncertainty that complicated decision-making around hiring, pricing and capital investment, with many firms adopting a wait-and-see posture.”

Motor vehicle production dropped 3.7 per cent after increasing 2.6 per cent in February. There were decreases in the output of primary metals, machinery as well as furniture and related products.

The production of durable goods fell 0.2 per cent. Output of nondurable manufactured goods edged down 0.1 per cent, though production of petroleum and coal as well as plastics and rubber products rose.

Mining output declined 1.2 per cent after rebounding 2.1 per cent in February. Energy production fell 1.6 per cent, with oil and gas well drilling decreasing 2.4 per cent.

The Beige Book noted that though activity in the energy sector rose slightly in early April, “many producers remained cautious about increasing drilling due to uncertainty about the persistence of higher prices.”

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Utilities production dropped 2.3 per cent as demand for heating declined. Utilities production increased 1.8 per cent in February. Overall industrial production dropped 0.5 per cent after an upwardly revised 0.7 per cent increase in February. Industrial output was previously reported to have gained 0.2 per cent.

It rose 0.7 per cent on a year-over-year basis in March and grew at a 2.4 per cent rate in the first quarter. Capacity utilisation for the industrial sector, a measure of how fully firms are using their resources, eased to 75.7 per cent from 76.1 per cent in February.

It is 3.7 percentage points below its 1972–2025 average. The operating rate for the manufacturing sector fell 0.2 percentage point to 75.3 per cent. It is 2.9 percentage points below its long-run average. REUTERS