Manufacturing Production Pulled Back in March, Ending Six Straight Monthly Gains

The Federal Reserve reported that manufacturing production pulled back in March, ending six straight monthly gains. Output in the sector declined 0.4 percent, pulled lower by a sharp reduction in motor vehicles and parts production, down 3.0 percent, among others. Yet, even with the reduced figures in March, the data continue to reflect improvements in the manufacturing sector, with activity turning a corner after struggling for much of the past two years due to a number of economic headwinds. Indeed, manufacturing production has increased 0.8 percent over the past 12 months, down from 1.0 percent in the prior release but with progress from declining year-over-year rates as recently as October. Similarly, manufacturing capacity utilization decreased from 75.6 percent—a 13-month high—to 75.3 percent. In general, the utilization rate has trended higher since bottoming out at 74.7 percent in August.

A sizable decline in durable goods activity—down 0.8 percent—pulled the March headline number lower, but on the positive side, nondurable goods production edged up 0.1 percent. Output was higher for petroleum and coal products (up 1.5 percent), computer and electronic products (up 0.9 percent), chemicals (up 0.4 percent) and paper (up 0.2 percent), but other segments were mostly lower. The largest declines included motor vehicles and parts (down 3.0 percent), apparel and leather (down 1.6 percent), electrical equipment and appliances (down 1.6 percent), primary metals (down 1.3 percent), miscellaneous durable goods (down 1.1 percent), aerospace and miscellaneous transportation equipment (down 0.8 percent), plastics and rubber products (down 0.8 percent), printing and support (down 0.8 percent) and wood products (down 0.4 percent).

Meanwhile, total industrial production increased 0.5 percent in March, its fastest gain since December and boosted by a large increase in utilities output, up 8.6 percent. As such, colder weather played a major factor in March’s gain. Mining production grew slightly, up 0.1 percent. Over the past 12 months, total industrial production increased 1.5 percent. That was the highest year-over-year rate since February 2015 and an improvement from the -2.4 percent year-over-year pace one year ago. Mining and utilities have risen 2.9 percent and 4.6 percent year-over-year, respectively. Capacity utilization rose from 75.7 percent to 76.1 percent, a 14-month high.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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