US factory production surges in March

US factory production surged in March, buoyed by increased output in motor vehicle assembly and other sectors, as per the Federal Reserve’s report released on Tuesday, signaling a potential turnaround for manufacturing despite previous constraints from higher borrowing costs, Reuters reported.

According to data, manufacturing output rose by 0.5 per cent last month, following a revised 1.2 per cent uptick in February. This exceeded economists’ expectation of a 0.3 per cent increase.

Year on year (YoY), factory production saw a 0.8 per cent rise in March. However, it dipped at a 0.1 per cent annualised rate in the first quarter, compared to a 0.9 per cent contraction in the previous quarter.

While manufacturing constitutes 10.4 per cent of the economy, a recent survey by the Institute for Supply Management revealed the sector’s growth for the first time in 18 months in March. Yet, concerns persist as the Federal Reserve is anticipated to postpone expected rate cuts due to persistent inflationary pressures, according to Reuters.

In specific sectors, motor vehicle and parts production rose by 3.1 per cent in March, following a 3.4 per cent increase in February.

Durable goods manufacturing saw a 0.3 per cent uptick, with notable increases in aerospace, transport equipment, and wood products, but declines in nonmetallic mineral products, furniture, and primary metals.

Nondurable goods production increased by 0.7 per cent, driven by gains in petroleum, coal, and chemical sectors, offsetting declines in food, beverage, and tobacco products.

Mining output declined by 1.4 per cent in March after a 3.0 per cent rebound in February, while utilities production rose by 2.0 per cent after a 7.6 per cent decrease in February. Overall industrial production increased by 0.4 per cent in March, consistent with February’s rise.

Year on year, industrial production remained unchanged in March, with a 1.8 per cent contraction in the January-March quarter and a 1.9 per cent shrinkage in the previous quarter.

Capacity utilisation for the industrial sector edged up to 78.4 per cent in March, slightly above the February figure of 78.2 per cent but still below the long-term average. The manufacturing sector’s operating rate increased to 77.4 per cent, below its long-run average by 0.8 percentage points.