Implications: Industrial production posted the first decline in four months in March as uncertainty surrounding the Iran War led to broad-based declines in activity.  However, the details were not nearly as bad as the headline.  Overall manufacturing output slipped 0.1% in March but the volatile auto sector was entirely to blame, dropping 3.8%.  Meanwhile, manufacturing ex-autos (which we think of as a “core” version of industrial production) actually rose 0.2%. The typical bright spots in the “core” measure were present in today’s report as well.  Production in high-tech equipment, which has been a reliable tailwind recently due to investment in AI as well as the reshoring of semiconductor production, increased 0.7% in March.  High-tech manufacturing is up a strong 6.8% in the past year, the fastest 12-month growth rate of any major category. The mining sector was also a source of weakness in March, falling 1.2%.  Declines in oil and gas production, the drilling of new wells, and the extraction of other metals and minerals all contributed. Given the recent surge in oil prices, we expect a strong rebound in this category in the months ahead as US energy companies boost production in response. Finally, utilities output (which is volatile and largely dependent on weather) declined 2.3% in March. In other news this morning, initial jobless claims fell 11,000 last week to 207,000, while continuing claims rose 31,000 to 1.818 million, suggesting job growth continues, but at a modest pace. On the manufacturing front, the Empire State Index – a measure of factory sentiment in the New York region – rebounded to +11.0 in April from -0.2 in March, likely weather related volatility. Meanwhile, the NAHB index, a measure of homebuilding sentiment, declined to 34 in April.  Keep in mind readings below 50 signal a greater number of builders view conditions as poor versus good, now the 24th consecutive month that has been the case. Finally, import prices rose 0.8% in March while export prices rose 1.6%.  In the past year, import prices are up 2.1%, while export prices have risen 5.6%.

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