Vehicle manufacturing drives industrial production

April 16, 2024

Manufacturing output, up 0.5%, supplied the bulk of the gain in March industrial output. The two other contributing industries, utilities and mining, offset each other. Utility output rose 2% while mining output fell 1.4%. March industrial production overall rose 0.4%, in line with the consensus. February production was revised upwards to 0.4% from 0.1%.

Within manufacturing output, the production of motor vehicles and parts made another solid contribution, rising 3.1% in March after increasing 3.4% in February. Motor vehicle inventories had been creeping higher in recent months but there was improvement in March. The days’ supply of vehicles among US automakers fell to 76 in March from 80 in February. Although the current level of inventories is still higher than manufacturers would prefer, the continuing strength in the labor market is seen as supporting consumer demand for new vehicles. On an annual basis, motor vehicle output rose 7.3% from a year ago, surpassing the flat reading for overall industrial production.

Industries associated with the housing sector posted mixed results. Wood products rose 0.7%, the second consecutive month of gains. Wood products are likely more of a leading indicator of housing construction. Builder sentiment remained optimistic in April. Furniture output declined 1%; it is down 7% from a year ago. The decline in this category is more reflective of the ongoing weakness in the resale market, a much larger size than the new home sale market, due to higher interest rates and low supply.

Computer and electronic products output rose 0.1%, a softer gain against a string of surges in recent months. Strong business demand for processing equipment due to generative AI should continue to fuel output for this sector. This is evident from the near 7% rise in output from a year ago.

Output of petroleum and coal products rose 4.8% in March after rising 0.5% in February. Crude oil prices have been climbing in recent months, providing an improved margin against breakevens for producers of petroleum products. Other areas of softness in March included primary metals, down 0.7%, machinery, down 0.4%, and fabricated metal products, down 0.2%.