Manufacturing Gains 1 while Industrial Production fell 6 Carl Court, Getty Images

Manufacturing Gains .1% while Industrial Production Falls .6%

WASHINGTON – U.S. industrial production fell sharply in March, pulled down by lower utility output as bad winter weather faded, the Federal Reserve said Wednesday.

Total industrial output fell 0.6%, after a minimal 0.1% rise in February. Compared with a year ago, industrial output was up 2% in March. The March drop was double what analysts expected.

However manufacturing eked out a 0.1% gain after two months of declines. "Core manufacturing slipped 0.1% and has tallied a 0.1% advance, a decline of 0.5%, a goose egg and a 0.1% decline in the last four months," said Michael Montgomery of IHS Global Insight.

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Some sectors did improve. “Motor vehicle output grew by a strong 3.2%, but this was on the heels of a 3.6% decline in February and more modest contractions in December and January," said Cliff Waldman, director of economic studies for the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation. "The sluggish housing rebound is clearly having an impact on manufacturing performance as wood products output has now contracted for three consecutive months and furniture output has contracted in two of the last three months.

In other areas, utilities output slid 5.9%, largely reversing February's increase that was weather-related. Mining output fell for the third straight month, but by a smaller 0.7%. As industrial output slowed, capacity utilization fell for the fourth month running, hitting 78.4%, well below the long-run average of 80.1%.

Looking for reasons to explain the drop, Montgomery said that "Manufacturing is flirting with stagnation under drag from foreign trade and slower inventory building and should continue to do so until at least the middle of the year."

Waldman offers other insights. “While the winter was once again difficult, the recent weakness in manufacturing performance cannot be blamed entirely on weather. The winter of 2014 was arguably more disruptive but U.S. manufacturing output nonetheless grew by 1.4% during the first quarter of 2014. “U.S. factories are confronting a number of difficult issues. While growth in the U.S. is generally stronger than in much of the world, it remains historically subpar and volatile. Economic performance in key parts of the world that matter to U.S. manufacturing profitability is either weak or weakening. The rising dollar adds to global challenges and saps U.S. factories of much-needed export demand. Declining energy investment in the wake of the oil price crash is a difficult issue as well.

Copyright Agence France-Presse, 2015

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