US industrial output unexpectedly fell in March, rising costs dragging down the manufacturing sector's recovery process.

The latest data shows that in March, industrial production in the United States decreased by 0.5% compared to the previous month, lower than the market's expected growth of 0.1%, indicating that the economic momentum is facing new downward pressure. In February, industrial production had a significant increase of 0.7% after revisions. However, in March, factory, mining, and utilities production all weakened. Manufacturing output, which accounts for about three-quarters of total industrial output, decreased by 0.1%; utility output saw a significant decline of 2.3%, and mining output also recorded a decrease. Before the outbreak of the US-Iran war, the US manufacturing sector had shown signs of recovery. Benefiting from eased trade policy uncertainty and steady equipment investment, factory output in the first quarter rebounded from the previous three months' low. Regional data also shows that manufacturing activity still has resilience, with indicators such as the Philadelphia Federal Reserve's manufacturing index reaching a higher level since 2021 and accelerating growth in new orders and shipments. However, as energy and raw material costs rise, business confidence is starting to weaken. Analysts point out that if the conflict persists, the high-cost environment may inhibit order growth and drag down the manufacturing sector's recovery process. Looking at specific industries, the decline in manufacturing in March was mainly due to a decrease in the output of consumer goods, commercial equipment, and raw materials. Industries such as automotive and parts, basic metals, and furniture all saw declines. However, excluding automobiles, manufacturing output still increased slightly by 0.1%, achieving a third consecutive month of growth. At the same time, capacity utilization also declined. Factory capacity utilization fell to 75.3%, and overall industrial utilization rates also decreased, reflecting a weakening matching between demand and production. Despite pressure on industrial activity, the labor market performance remains strong. The latest data shows that last week, the number of initial jobless claims in the United States decreased by 11,000 to 207,000, the largest drop since February, indicating that the scale of business layoffs remains limited.