16 June 2019

US Manufacturing Is Softer In March

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Industrial production rose 0.4% month over month (m/m) in March, above the consensus (0.2%). However, this was led by an outsized gain in the volatile utilities component (5.3%). The narrower manufacturing output measure declined by 0.1%, led by durable goods (-0.2%), weakness in electronics (-0.8%), and primary metals (-2.7%). The decline was offset by a 2.9% increase in vehicles. Non-durables output was flat on the month.

This adds to the picture of a softening of activity at the end of the first quarter 2013, relative to the start of the year, with weaker March data now seen across retail sales, employment and output. The decline in manufacturing output in March was largely offset by an upward revision to February (by three-tenths to +0.9%) and it rose a solid 5.3% quarter over quarter (saar) in Q1 as a whole (Figure 1). More broadly, the weaker March number fits with our view that, having ramped up production early in the year, in part to rebuild inventory, firms have restored a more normal level of activity heading into Q2. Alongside a likely softening of household sector demand leads us to expect softer output growth in Q2 relative to Q1.
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