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April 17, 2018 10:15 AM, EDT

Factory Output Cools After Surging in Previous Month

Paul Taggart/Bloomberg News

U.S. factory production cooled in March after surging a month earlier, representing a pause in an otherwise strong manufacturing sector, Federal Reserve data showed April 17.

Highlights of Industrial Production for March

• Factory output rose 0.1% (matching estimate) after an upwardly revised 1.5% increase that was the biggest since July 2009.

• Output at factories increased 3% from March 2017, the biggest year-over-year gain since June 2012.

• Total industrial production, which also includes mines and utilities, increased 0.5% (est. 0.3% rise) after a revised 1% gain.

• Total capacity utilization, measuring the amount of a plant that is in use, rose to 78% (est. 77.9%) from 77.7%.

Key Takeaways

Factory output expanded at a 3.1% annualized rate in the first quarter after a 5.5% pace the final three months of 2017, the strongest back-to-back period in six years. Manufacturing makes up 75% of total industrial production and accounts for about 12% of the economy.

The outlook for manufacturing remains solid as fiscal stimulus provides support for increased business investment, while improving global economies and a weaker dollar help underpin U.S. exports. Economists also expect lower taxes to bolster domestic consumer demand. One potential risk to some American manufacturers is the trade spat between the United States and China.

Meanwhile, the factory-use rate eased in March to 75.9% from 76% a month earlier that was the highest since August 2015. While the plant-use rate has been climbing, it remains 2.4 percentage points below the long-run average.

Other Details

• Utility output jumped 3% after being restrained the prior month by warmer-than-normal temperatures.

• Mining production rose 1%; with oil and gas-well drilling rising 4.1%.

• Durable goods manufacturing climbed 0.4%, while output of nondurable goods fell 0.3% on declines in foods, plastics and textiles.

• Production of motor vehicles and parts increased 2.7% after a 3.9% advance.

• Production of consumer goods rose 0.5%, the most in three months, while output of business equipment also climbed 0.5%.

With assistance by Jordan Yadoo