The Federal Reserve Board reported that industrial production was unchanged in March for the second month in a row. Manufacturing production decreased by 0.2 percent, reversing the 0.8 percent gain of February. Manufacturers’ capacity utilization rate also declined from 78.0 percent to 77.8 percent. The longer-term trend remains a positive one, though, with manufacturing production up 4.8 percent over the past year and capacity utilization increasing by 0.7 percent.
For the manufacturing sector, there were some bright spots. Motor vehicle production rose 0.6 percent in March and is up 13.7 percent year-to-year, highlighting that industry’s recent resurgence. High-tech industries such as computers, communications equipment and semiconductors experienced a 1.2 percent gain for the month. Other sectors experiencing gains included machinery (up 0.5 percent), miscellaneous durables (up 0.4 percent), chemicals (up 0.3 percent) and wood products (up 0.3 percent).
As a whole, however, both durable and nondurable goods production fell in March, with each down 0.2 percent. The largest monthly declines were seen in nonmetallic mineral products (down 2.4 percent), printing and support (down 2.2 percent), primary metals (down 1.8 percent), furniture and related products (down 1.7 percent), apparel and leather (down 1.6 percent) and electronic equipment and appliances (down 1.2 percent). In all, only 6 of the 19 major manufacturing sectors experienced gains.
These numbers show spring weaknesses in the manufacturing sector, mirroring data from other surveys. Overall production remains higher than in previous months, and manufacturers continue to be positive about future activity. Yet, as we have been saying for some time, significant headwinds in the economy persist, and the recent run-up in energy and raw material costs have not gone unnoticed, either by manufacturers or the consumer. (This is true despite the fact that retail sales were up significantly yesterday.)