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Industrial Production +0.5 Percent But Manufacturing Weak At +0.1 Percent

By Kurt Osterberg · On April 17, 2018

Industrial production beat the consensus (ignoring revisions), but manufacturing was weak once again.

The Fed’s Industrial Production and Capacity Utilization report shows production rose 0.5 percent in March.

Details

Industrial Production rose 0.5 percent in March after increasing 1.0 percent in February. Production advanced 4.5 percent at an annual rate for the first quarter as a whole.

Manufacturing production edged up 0.1 percent in March following a 1.5 percent jump in February.

Mining output rose 1.0 percent, mostly as a result of gains in oil and gas extraction.

The index for utilities jumped 3.0 percent after being suppressed in February by warmer-than-normal temperatures.

At 107.2 percent of its 2012 average, total industrial production was 4.3 percent higher in March than it was a year earlier.

Capacity utilization for the industrial sector moved up 0.3 percentage point in March to 78.0 percent, a rate that is 1.8 percentage points below its long-run (1972–2017) average.

Econoday Synopsis

Bloomberg Econoday offers this assessment.

Industrial production rose a very solid 0.5 percent in March for a 4.3 percent year-on-year rate with mining once again leading the report, jumping 1.0 percent on top of February’s 2.9 percent surge to lift year-on-year volumes to a 10.8 percent gain. Utilities also had a good March, with output up 3.0 percent in the month following a 5.0 percent weather-related decline in February. Year-on-year, utility output is up 5.3 percent.

Now the not-so-impressive news. Manufacturing production managed only a 0.1 percent gain which is just short of Econoday’s already modest consensus. Year-on-year, production volumes are up only 3.0 percent though there are positive details in the March report. Business equipment output is solid and up 4.4 percent on the year with the selected hi-tech component showing plenty of strength, up 1.2 percent on the month and 8.9 percent on the year. Vehicle production is another positive, up 2.7 in March for an 8.2 percent year-on-year rate that, however, looks aggressive given what have been mostly moderate results for vehicle sales.

Tariffs imposed on steel and aluminum during the month don’t appear to have had any measurable effect in this report though they probably didn’t help construction supplies where output fell a monthly 0.3 percent. Turning to capacity rates, overall utilization climbed 3 tenths to 78.0 percent but is still short of the nearly 80 percent trend several years ago. But clear stress is evident in mining where capacity is at 90.1 percent. In sum, there are plenty of positives with details helping to offset the headline disappointment for manufacturing production while mining remains one of the economy’s top drivers.