Industrial Production Is Flat in March

Manufacturing stumbles to end of a strong first quarter.

Industrial production was unchanged in March for the second consecutive month, theFederal Reserve Board reported, but rose at an annual rate of 5.4% for the first quarter of 2012.

Manufacturing output declined 0.2% in March but rose 10.4% for the first quarter as a whole.

The March weakness was "broad-based and likely indicative of a downshifting in activity, said Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation. Production in a fairly wide range of both durable and nondurable goods industries contracted."

High-technology industries were among the bright spots in the March report, with semiconductors up 1.6%, and computers and peripherals up 0.9%. Motor vehicle production was up 0.6% for the month and rose 13.7% compared to March 2011. Machinery was up 0.5% in March and 7.8% compared to last year.

"Machinery and motor vehicle output were positive and strong but primary and fabricated metal outputwhich provide inputs into many manufacturing supply chainsboth fell," Waldman observed. "The output of furniture and related products declined by a sizable 1.7% but after two outsized gains in January and February, suggesting a weather-related seasonal distortion."

Declines were seen in nonmetallic mineral products (-2.4%), printing and support (-2.2%) and primary metals (- 1.8%). As a whole, both the durable and nondurable manufacturing sectors posted 0.2% declines for the month.

Capacity utilization in manufacturing slipped 0.2% in March to 77.8%. The Federal Reserve noted this was 14 percentage points above its low point in June 2009 but still 1% below its long-run average.

Evidence of weakening business equipment demand amidst a still sluggish U.S. economy as well as a wide range of global growth concerns, most notably the recession in the Eurozone and the sharp slowdown in key emerging markets, suggests that the March report might herald the beginning of a period of more moderate growth for a U.S. manufacturing sector that has persistently surprised on the upside with regard to both output and employment gains, Waldman concluded.

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