A worker arc welds a metal door during production at a manufacturing facility in Sacramento, California.
U.S. industrial production declined in March as manufacturing softened and utility output decreased in the wake of the Iran war. The 0.5 percent drop in production at factories, mines, and utilities followed an upwardly revised 0.7 percent surge in February, according to Federal Reserve data out today. Before the data was released, economists had projected a 0.1 percent advance, according to the Bloomberg survey median.
Manufacturing output, which accounts for three-fourths of total industrial production, slipped 0.1 percent after a stronger advance in February than initially reported. Output at utilities decreased 2.3 percent, while mining also fell.
Before the war in the Middle East, seeds of a manufacturing recovery were starting to take root amid less trade policy uncertainty and solid capital investment in equipment. The Fed's report showed that factory output in the first quarter rebounded after the worst three-month period in three years.
Separate figures from the Philadelphia Fed showed a gauge of current manufacturing activity increased this month to one of the highest levels since 2021. The survey showed orders and shipments growth accelerated, though so did a measure of input prices.
However, business optimism is showing signs of souring due to higher energy and materials costs that risk limiting factory orders if the conflict persists.
The Fed's industrial output report showed that the decline in manufacturing reflected weaker production of consumer and business equipment, as well as materials. Among industry groups, motor vehicles and parts production decreased, along with primary metals and furniture. Excluding autos, factory output edged up 0.1 percent, marking the third straight monthly advance.
Capacity utilization at factories, a measure of potential output being used, eased to 75.3 percent. The overall industrial utilization rate also fell.
Separate data out today showed initial jobless claims fell last week, adding to evidence that layoffs remain largely limited. Applications for unemployment benefits dropped 11,000—the biggest weekly decline since February—to 207,000.
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