Manufacturing Output in U.S. Falls by Most Since February 2015

U.S. manufacturing output unexpectedly declined in March by the most since February 2015, indicating factories remain scarred by global challenges that are slow to dissipate.

The 0.3 percent drop at factories, which make up 75 percent of production, followed a revised 0.1 percent decrease the prior month, a Federal Reserve report showed Friday. The median forecast in a Bloomberg survey called for a 0.1 percent advance. Total industrial production, including mines and utilities, slumped by a weaker-than-estimated 0.6 percent for a second month.

Manufacturers are still under pressure from tepid overseas markets while last year’s surge in the dollar and plunge in commodities prices continue to make an impact. Another possible emerging soft spot is sluggish American household demand as the report showed a second month of declining consumer goods production.

“The manufacturing sector is struggling with an uncertain global growth outlook, past declines in commodities prices and past appreciation of the dollar,” Brittany Baumann, a New York-based economist at Credit Agricole CIB, said before the report. “Those effects were still lingering in March.”

Another report Friday showed manufacturing in the New York region expanded this month at the fastest pace since January

2015. The Federal Reserve Bank of New York’s Empire State index climbed to 9.6 in April from 0.6 a month earlier.

Manufacturing accounts for about 12 percent of the economy.

Economists’ estimates in the Bloomberg survey for factory output ranged from a 0.4 percent decline to a 0.3 percent increase.

For total industrial production, the Bloomberg survey median called for a 0.1 percent decline, after a previously reported 0.5 percent decrease in February.

Utility Use

Utility output decreased 1.2 percent after a 3.6 percent slump the previous month, the Fed report showed.

Demand for heating remained limited as warm weather continued last month. It was the warmest March since 2012 in the contiguous U.S., following the mildest February since 2000, according to the National Oceanic and Atmospheric Administration.

Mining production, which includes oil drilling, decreased

2.9 percent. Weaker prices for oil and other commodities will continue to weigh on mining for some time, economists predict.

The U.S. rig count has continued a relentless slide that started at the end of 2014, reflected in depressed activity. The number of oil and natural-gas rigs fell to 443 in the week ended April 8 from 450 in the prior period, according to Baker Hughes Inc. data.

Factory Capacity

Capacity utilization, which measures the amount of a plant that is in use at factories, mines and utilities, fell to 74.8 percent from 75.3 percent in the prior month. At manufacturers, capacity dropped to 75.1 percent in March, the weakest reading since April 2014.

Most major market groups recorded declining production last month. The output of consumer goods decreased 0.4 percent after a 0.8 percent slide a month earlier.

Production of business equipment was down 0.4 percent, the most in three months, and output of construction supplies slumped 1.2 percent.

The output of motor vehicles and parts decreased 1.6 percent, the most since November. Excluding autos and parts, manufacturing fell 0.1 percent after a 0.2 percent decrease.

Industry data earlier this month signaled vehicle demand is leveling off from its torrid pace. Purchases of cars and light trucks grew at a 16.5 million annualized rate in March, the slowest since February 2015, according to Ward’s Automotive Group.

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