US industrial production declined at the fastest rate in two-and-a-half years in March, raising fresh concerns about the economic recovery at the end of the first quarter.
Industrial production – a gauge of factory activity in the manufacturing, mining and utilities sectors – fell 0.6% in March following a 0.1% gain the previous month, the Board of Governors of the Federal Reserve System reported recently in Washington. The median estimate of economists called for a drop of 0.3% in March.
February’s gain was unrevised, but January’s reading was changed to reflect a 0.4% drop rather than a 0.3% fall.
Compared to March 2014, industrial production rose 2%.
Manufacturing production, which represents approximately 12 percent of the US economy and three-quarters of industrial production, climbed only 0.1%. Year-on-year, manufacturing output rose 2.4%.
Manufacturing activity weakened broadly last month, according to the latest PMI figures from the Institute for Supply Management (ISM). The March PMI rate of 51.5 was 1.4 percentage points below the February rate. New orders grew at a slower rate from February, while employment barely grew.
Output in the mining sector, which includes oil drilling, fell 0.7%. Compared to March 2014, mining output rose 3.7%.
Utilities output fell 5.9% in March and was down 3.6% annually, official data showed.
Among the major market groups, the production of nonindustrial supplies declined 1%, while construction fell 0.9%. The only market group to report an increase last month was business equipment, which rose 0.2%.
Industrial capacity utilization, which measures how fully companies are using their factory resources, Slipped to 78.4% in March from 79% in February. That was 0.3 percentage point below forecasts and 1.7 percentage point below the long-run average (1972-2014).
Industrial production figures declined 1 percent annually in the first quarter, marking the first quarterly drop since the second quarter of 2009. US gross domestic product was forecast to grow around 2% annually in the first quarter, but with the latest factory figures some economists suggest growth could be much slower than that. The Department of Commerce will release its first estimate of first quarter GDP later this month.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.