U.S. Factory Output stalls in March on auto production decline

by Ike Obudulu Posted on April 16th, 2019

Washington: U.S. factory production stalled in March as motor-vehicle output declined, adding to signs of headwinds for manufacturing and economic growth around the world.

Manufacturing output was unchanged from February after falling a revised 0.3 percent, Federal Reserve data showed Tuesday. That compared with the median estimate for a 0.1 percent increase in a survey of economists. Total industrial production, which also includes mines and utilities, fell 0.1 percent, also trailing forecasts for a gain and following a 0.1 percent advance.

The data signal further manufacturing softness as producers cope with an inventory buildup, continuing uncertainty around trade and a dimming global growth outlook.

The International Monetary Fund last week cut its forecast for the world economy to the weakest level since the financial crisis, though the Fed’s patient approach to raising interest rates should support U.S. expansion.

Production of motor vehicles and parts decreased 2.5 percent, the second decline in three months, to the lowest level since July. Excluding the sector, manufacturing output rose 0.2 percent after a 0.5 percent decline the prior month, with gains in industries including primary metals, computers and electronics and aerospace and other transportation equipment. Manufacturing output fell at a 1.1 percent annual rate in the first quarter, the worst performance since late 2017.

The data echo some other reports on the sector. Regional Fed surveys for New York and Philadelphia have broadly been cooling in recent months.

Capacity utilization, measuring the amount of a plant that is in use, fell to 78.8 percent, the lowest since July, from 79 percent.

Utility output rose 0.2 percent after advancing 3.7 percent the prior month. Mining production fell 0.8 percent, while oil and gas well drilling rose 0.3 percent.

Machinery production rose 0.5 percent, while output of consumer goods fell 0.2 percent, and business-equipment production rose 0.4 percent.

Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy how far growth has room to run before it becomes inflationary.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75 percent of total industrial production, accounts for about 12 percent of the U.S. economy

Industrial production, also called, factory output measures change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities;

It’s a leading indicator of economic health – production reacts quickly to ups and downs in the business cycle and is correlated with consumer conditions such as employment levels and earnings.

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