US manufacturing output slows in March; tariffs cloud hangs over factories

U.S. manufacturing production rose moderately in March and could decelerate further amid President Donald Trump's global tariffs, which have sparked a trade war with China.

Factory output increased 0.3% last month after an upwardly revised 1.0% rebound in February, the Federal Reserve said on Wednesday. Economists polled by Reuters had forecast production rising 0.3% after a previously reported 0.9% jump.

Production at factories advanced 1.0% on a year-on-year basis in March. Manufacturing, which accounts for 10.2% of the economy, grew at a 5.1% rate in the first quarter after contracting at a 1.5% pace in the October-December quarter.

Import duties are threatening to abruptly end the tentative recovery that emerged at the start of the year against the backdrop of the U.S. central bank cutting interest rates.

Anecdotes from the Institute for Supply Management survey early this month offered a gloomy assessment of business conditions, with tariffs cited as a major factor by manufacturers.

Motor vehicle and parts output increased 1.2% last month after accelerating 9.2% in February. Durable manufacturing production increased 0.6%, also boosted by a 1.8 % jump in aerospace and miscellaneous transportation equipment output.

There were also gains in the production of other long-lasting manufactured goods. Nondurable manufacturing production was little changed as increases in food, apparel, leather, chemicals, plastics and rubber products offset declines in the output of textile, paper, petroleum and coal products.

Mining output rose 0.6% after rebounding 1.7% in February. Utilities production declined 5.8% as temperatures warmed up, reducing demand for heating. Utilities output dropped 1.5% in February.

Industrial production fell 0.3% after increasing 0.8% in February. It increased 1.3% year-on-year in March and expanded at a 5.5% at a rate in the first quarter.

Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, dipped to 77.8% from 78.2% in February. It is 1.8 percentage points below its 1972–2024 average. The operating rate for the manufacturing sector rose 0.2 percentage point to 77.3%. It is 0.9 percentage points below its long-run average.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)