US: Manufacturing output slowed in March - Nomura

Analysts at Nomura point out that excluding auto production, US factory output fell 0.1% m-o-m in March, following an upwardly revised 1.0% m-o-m gain in February.

Key Quotes

“We think that the decline in factory output was likely transitory and maintain our optimistic manufacturing sector outlook. Looking ahead, tax policy changes, including favorable expensing provisions over the near term, along with synchronized global growth will likely provide support for business investment, while increased trade concerns have the potential to dampen business sentiment significantly.”

“By industry, March production data were mixed. While computers and electronics output rose solidly by 1.0% and autos and parts production increased 2.7%, most other durable goods production was weak. Excluding autos, durable goods production was essentially flat, pointing to weakness in investment in business equipment in March. In particular, fabricated metal products output was down 0.2%, machinery production fell 0.4%, and electrical equipment and appliance output dropped sharply by 1.9%. Nondurable goods production declined as well.”

“GDP tracking update: According to the latest industrial production report, auto assemblies were mostly in line with our expectations in March, but assemblies in February and January were revised down. The downward revisions suggest less inventory accumulation in Q1. In addition, utilities output was slightly stronger than expected in March. This implies more personal spending on utility services and thus greater PCE in Q1. On net, after rounding, our Q1 real GDP tracking estimate is unchanged at 1.6% q-o-q saar.”