U.S. Manufacturing Gains Momentum After Another Strong Month

U.S. industrial production rose for the second consecutive month in March, with a notable rise in output from motor vehicle assembly plants among others. This increase points to a rebound for the manufacturing sector after it struggled with high borrowing costs.

The Federal Reserve reported that manufacturing output grew by 0.5% in March, following a revised increase of 1.2% in February (up from the original report of 0.8%). This growth exceeded expectations, as economists had predicted a rise of only 0.3%.

Factory production rose by 0.8% compared to March 2023. However, it slightly declined by 0.1% on an annualized basis in the first quarter of the year, following a loss of 0.9% in the last quarter of the previous year.

Manufacturing, which makes up 10.4% of the U.S. economy, showed signs of expansion for the first time in 18 months, according to a survey from the Institute for Supply Management. However, with the Federal Reserve likely to postpone a planned rate cut due to persistent high inflation, the sector still faces challenges.

“The U.S. manufacturing sector moved into expansion for the first time since September 2022. Demand was positive, output strengthened and inputs remained accommodative,” said Timothy R. Fiore, Chair of the Institute for Supply Management.

In detail, output in motor vehicles and parts surged by 3.1% last month, after a 3.4% increase in February. Durable goods manufacturing went up by 0.3%, with significant growth in aerospace, miscellaneous transportation equipment, and wood products. However, there was a decline in the production of nonmetallic mineral products, furniture, and primary metals.

Nondurable goods production rose by 0.7% while Mining output fell by 1.4% after a 3.0% rebound in February. Utility production increased by 2.0% after a 7.6% decrease in February. Overall industrial production rose by 0.4% in March, matching the increase from the previous month.

Industrial production remained the same compared to March 2023. It contracted by 1.8% during the January-March quarter, following a 1.9% decline in the last quarter of the previous year.