An employee works on an assembly line at startup Rivian Automotive’s electric vehicle factory in Normal, Illinois, U.S. April 11, 2022. REUTERS/Kamil Krzaczynski
WASHINGTON – Production at U.S. factories fell more than expected in March, but eked out a modest gain in the first quarter.
Manufacturing output dropped 0.5 percent last month, the Federal Reserve said on Friday. Data for February was revised higher to show production at factories increasing 0.6 percent instead of edging up 0.1 percent as previously reported.
Economists polled by Reuters had forecast production would dip 0.1 percent. Output decreased 1.1 percent on a year-on-year basis in March.
Manufacturing output rose at a 0.3- percent annualized rate in the first quarter after declining at a 3.1- percent pace in the October-December period. The modest growth in production last quarter is at odds with surveys that have suggested that manufacturing was in deep recession.
Manufacturing, which accounts for 11.3 percent of the U.S. economy, is struggling as higher interest rates undercut demand for goods, which are typically bought on credit.
Spending is also shifting from goods to services. Businesses are holding excess inventory as demand slows, reducing the incentive to place more orders with factories.
The Institute for Supply Management’s measure of national manufacturing activity has contracted for five straight months, with all its subcomponents falling below the 50 threshold in March for the first time since 2009.
Last month, durable manufacturing output fell 0.9 percent, with producers of long-lasting goods posting declines. Output of nondurable goods slipped 0.1 percent.
Mining output fell 0.5 percent after dropping 1 percent in February. Utilities production surged 8.4 percent after dropping 0.7 percent in the prior month. The sharp rebound in utilities offset the declines in manufacturing and mining, lifting overall industrial production by 0.4 percent last month.
Industrial output gained 0.2 percent in February. Industrial production grew at a 0.2- percent rate in the first quarter after contracting at a 2.5- percent rate in the fourth quarter.
Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, fell 0.5 percentage point to 78.1 percent in March. It is 0.1 percentage point below its long-run average.
Overall capacity use for the industrial sector rose to 79.8 percent from 79.6 percent in February. It is 0.1 percentage points above its 1972-2022 average.