Utilities Lead Healthy March Increase In U.S. Industrial Production

U.S. industrial production increased 0.5 percent year-over-year in March after a 0.1 percent uptick in February, largely accounted for by a jump of 8.6 percent in the output of utilities — the largest in the history of the U.S. Federal Reserve industrial production index.

Industrial production increased 0.5 percent in March after moving up 0.1 percent in February. The increase in March was more than accounted for by a jump of 8.6 percent in the output of utilities — the largest in the history of the index — as the demand for heating returned to seasonal norms after being suppressed by unusually warm weather in February. Manufacturing output fell 0.4 percent in March, led by a large step-down in the production of motor vehicles and parts; factory output aside from motor vehicles and parts moved down 0.2 percent. The production at mines edged up 0.1 percent. For the first quarter as a whole, industrial production rose at an annual rate of 1.5 percent. At 104.1 percent of its 2012 average, total industrial production in March was 1.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.4 percentage point in March to 76.1 percent, a rate that is 3.8 percentage points below its long-run (1972–2016) average.

Market Groups

In March, the jump in the output of utilities contributed substantially to gains in the indexes for consumer goods, business supplies, and materials through their energy components. Among the non-energy market groups, consumer durables posted a decline of 1.7 percent as a result of large decreases for automotive products and for appliances, furniture, and carpeting. The output of consumer non-energy nondurables moved up 0.2 percent, with gains in chemical products and paper products partly offset by losses in foods and tobacco and in clothing. Despite an increase for information processing equipment, decreases for transit equipment and for industrial and other equipment caused the index for business equipment to decline 0.4 percent. The output of defense and space equipment slipped 0.2 percent. The indexes for construction supplies and non-energy business supplies moved down 0.8 percent and 0.4 percent, respectively. As a result of large increases in the previous months, the output of construction supplies rose at an annual rate of 9.5 percent for the first quarter; the index for non-energy business supplies rose 2.1 percent. The production of non-energy materials declined 0.6 percent in March, with losses in most of its components.

Industry Groups

Manufacturing output decreased 0.4 percent in March, and the gains in January and February are now reported to have been smaller than stated earlier. The decline in the manufacturing index in March was its first loss since August 2016; nevertheless, factory output increased at an annual rate of 2.7 percent in the first quarter. The production of durables moved down 0.8 percent in March. Among its major components, only computer and electronic products registered an increase, about 1 percent, and motor vehicles and parts recorded the largest decrease, 3.0 percent. The index for nondurables edged up, as gains in petroleum and coal products, in chemicals, and in paper products offset losses elsewhere. The output of other manufacturing (publishing and logging) fell 0.4 percent.

Mining output edged up 0.1 percent in March, with continuing gains in oil and gas extraction and in drilling and support activities slightly outweighing large decreases in coal mining and in nonmetallic mineral mining. After advancing 6.6 percent at an annual rate in the fourth quarter, the index for mining jumped 12.1 percent in the first quarter.

Capacity utilization for manufacturing fell 0.3 percentage point in March to 75.3 percent, a rate that is 3.1 percentage points below its long-run average. The operating rate for durables declined 0.7 percentage point, to 74.6 percent, and was 2.3 percentage points below its long-run average. The rates for nondurables and for other manufacturing (publishing and logging), little changed in March at 77.0 percent and 63.6 percent, respectively, remained substantially below their long-run averages. Utilization for mining edged down 0.1 percentage point to 81.9 percent, and the rate for utilities jumped 6.0 percentage points to 75.7 percent.

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