Photographer: Matthew Busch/Bloomberg

Factory Production in U.S. Falls Most Since August on Autos

Output at U.S. manufacturers fell in March by the most since August as production of automobiles and parts and business equipment declined, Federal Reserve data showed on Tuesday.

Key Points

  • Factory production dropped 0.4 percent, following a 0.3 percent rise in February (forecast called for unchanged)
  • Total industrial production gained 0.5 percent on a record jump in utility output (forecast called for 0.5 percent rise)
  • Capacity utilization, which measures the amount of a plant that is in use, rose to 76.1 percent from 75.7 percent in the prior month (forecast called for 76.1 percent)

Big Picture

The weakness in auto manufacturing mirrors a slowdown in sales to consumers, indicating that a broader recovery at factories remains bumpy, with production rising 0.8 percent last month from a year earlier. The rebound in utility output follows two months of sharp declines amid unusually warm weather and may reflect stronger demand for heating with March temperatures that were a bit more seasonal.

Economist Takeaway

Even with the latest weak result, there is “a marked improvement on last year, when manufacturing output all but stalled due to the weakness of global demand and the dollar’s earlier rapid appreciation in 2015,” Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, said in a note.

Other Details

  • Utility output rose 8.6 percent, the most in data going back to 1939, after a 5.8 percent drop the previous month
  • Production of motor vehicles fell 3 percent, the most since last May. Excluding autos and parts, industrial production increased 0.8 percent after no change
  • Manufacturing output excluding vehicles and parts dropped 0.2 percent in March after a 0.3 percent gain a month earlier and a 0.5 percent jump in January
  • Oil and gas well drilling rose 7.7 percent
  • Production of non-energy materials fell 0.6 percent after a 0.7 percent gain
  • Production of nondurable consumer goods rose 2.1 percent, while output of business equipment decreased 0.4 percent, the most since August
  • Machinery production fell 0.5 percent and output of computers and electronics rose 0.9 percent

— With assistance by Jordan Yadoo, and Sho Chandra

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