US manufacturing output falls in April on weak auto production

WASHINGTON – US manufacturing production fell more than expected in April amid a sharp decline in motor vehicle output, and the sector could struggle to regain its footing in the second quarter because of tariffs.

Factory output dropped 0.4 per cent in April after an upwardly revised 0.4 per cent gain in March, the Federal Reserve said on May 15. Economists polled by Reuters had forecast production would slip 0.2 per cent after a previously reported 0.3 per cent rise.

Production at factories increased 1.2 per cent on a year-over-year basis in April. President Donald Trump’s shifting tariffs policy poses a significant headwind to manufacturing, which accounts for 10.2 per cent of the economy and relies heavily on imported raw materials.

While the Trump administration slashed duties on Chinese imports last weekend to 30 per cent from 145 per cent, a 10 per cent tariff on nearly all imports remained in place as did a 25 per cent tax on steel and aluminum as well as motor vehicles and parts.

Mr Trump has defended the tariffs as necessary to revive a long-declining US industrial base, but economists say it is impossible to bring factories that moved overseas back to the country, citing high production and labour costs as among the challenges.

Manufacturing grew at a 4.8% per cent rate in the first quarter after a prolonged slump due to higher interest rates.

Motor vehicle and parts output plunged 1.9 per cent in April after increasing in the prior two months, as automakers tried to stay ahead of tariffs. Motor vehicle manufacturers have warned tariffs would significantly cut into profits this year.

Durable manufacturing production fell 0.2 per cent. Non-durable manufacturing production decreased 0.6 per cent, with most industries posting declines.

Mining output slipped 0.3 per cent after posting strong gains in the previous two months. Utilities production rebounded 3.3 per cent. That followed two straight monthly declines.

Overall industrial production was unchanged after easing 0.3 per cent in March. It increased 1.5 per cent on a year-over-year basis in April.

Capacity utilisation for the industrial sector, a measure of how fully firms are using their resources, dipped to 77.7 per cent from 77.8 per cent in March. It is 1.9 percentage points below its 1972–2024 average. The operating rate for the manufacturing sector dropped four-tenths of a percentage point to 76.8 per cent. It is 1.4 percentage points below its long-run average. REUTERS

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