Factory production in U.S. unexpectedly decreased in March

Factory production in the U.S. unexpectedly dropped in March, adding to recent signs that manufacturing is cooling.

Output at factories fell 0.1% after a 0.9% increase in February that was larger than previously reported, figures from the Federal Reserve showed today in Washington. The median estimate in a Bloomberg survey of economists called for a 0.1% rise. Total industrial production, climbed 0.4% as colder-than-normal temperatures drove the biggest gain in utility use in six years.

Output is slowing as companies restrain inventory-building and global markets soften at a time the U.S. is poised for a projected easing in second-quarter growth as automatic cuts in planned federal spending take effect. Companies such as rail-car maker Greenbrier Cos. expect a better second half, a sign business investment is unlikely to retrench.

“The prior month was very strong so there is probably a return to more normal growth,” Josh Dennerlein, an economist at Bank of America Corp. in New York, said before the report. “The next couple of months are when we could see some weakness as the hit from the sequestration trickles through the economy.” Even so, “manufacturing is still going to be growing,” he said.

Stock-index futures held earlier gains after the report as housing starts and corporate earnings topped estimates. The contract on the Standard & Poor’s 500 Index maturing in June rose 0.8% to 1,556 at 9:21 a.m. in New York.

Survey Results

The median estimate for total industrial production of the 82 economists surveyed by Bloomberg called for a 0.2% gain. Projections ranged from a drop of 0.5% to an increase of 0.7%. The prior month was revised up to a 1.1% increase from a previously reported 0.8% advance.

Manufacturing, which makes up 75% of total production and accounts for about 12% of the economy, was restrained by declines in production last month of metals, computers, electrical equipment and furniture.

One of the bright spots in March was auto making. The output of motor vehicles and parts increased 2.9% after a 2% gain a month earlier, today’s report showed. Excluding autos and parts, manufacturing production dropped 0.3%, the biggest decline since October, after a 0.8% rise.

Cars and light trucks sold at a 15.2 million annual pace in March, capping the strongest three months for purchases since early 2008, data from Ward’s Automotive Group showed.

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