Industrial production declined in March
Manufacturers are trying to get ahead of tariffs.聽
April 16, 2025
March industrial production fell 0.3%, the first decline in four months and nearly in line with the market consensus of -0.2%. A sharp drop in utility output, -5.8%, due to warmer-than-usual weather, dragged overall industrial output into negative territory. The two other key components of industrial output, manufacturing and mining, fared better. They rose 0.3% and 0.6%, respectively.
Manufacturing output rose 0.3% in March after rising 1% in February. A wide swath of industries saw gains due to manufacturers鈥� front-running of production ahead of probable input price increases due to tariffs. Still, March鈥檚 0.3% rise in manufacturing output was not as robust as the 1% increase in February. Factories added to inventories last month but producers remain mindful of further potential shifts in trade policy and the hit to consumer demand from price hikes, which could become apparent in the month鈥檚 economic reports for April.
The production of motor vehicles and parts rose a further 1.2% in March after rising 9.2% in February. Machinery output and fabricated metal products notched gains of 0.9% and 0.8%, respectively. Other industries expected to experience higher input costs, such as apparel and furniture, posted increases of 2.2% and 0.7%.
Computer and electronics production rose 1% due to ongoing chip demand. On an annual basis, this sector rose 6.8%, the fastest growth pace among all industries and compares with overall manufacturing output churning at just 1% annually.
Aerospace production increased 1.8% due to the resumption of plane assemblies at a major producer following a strike last year. News that a major sovereign buyer is halting airlines from taking deliveries could impact production later this year.
We foresee declining factory output and weaker business investment in the coming quarters, consistent with our outlook for a recession.
Ken Kim
乐鱼（Leyu）体育官网 Senior Economist
Bottom Line:
Manufacturers again increased output in March, as they did in February, to get ahead of tariffs. The outlook for the factory sector for the rest of 2025 is one of uneasiness and uncertainty. Reciprocal tariffs announced in early April, in addition to tariffs implemented for steel and aluminum in March, are expected to simultaneously increase the prices of goods and reduce consumer and business demand for many items. The forward-looking Institute for Supply Management (ISM) manufacturers' new orders index tumbled into contractionary territory in March, registering 45.2. Below 50 readings signify declining activity. We foresee declining factory output and weaker business investment in the coming quarters, consistent with our outlook for a recession beginning in the second quarter.聽
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