Cooler weather in March after a warm February pushed Utility production up +8.6% M/M to the largest jump in the history of the Federal Reserve’s Industrial Production report. However, a step-down in motor vehicle and parts production dropped manufacturing output by -0.4% M/M, lowering the overall gain to +0.5% M/M for March, and +1.5% Y/Y. Overall capacity utilization was up +0.4%, with a +6.0% gain in utilities offsetting a -0.3% drop in manufacturing and a -0.1% drop in mining.

Respondents to the Philadelphia Fed’s April Manufacturing Survey indicated continued growth and optimism, although levels for both have declined from 2016 Q1 highs. 52% of the firms surveyed indicated plans to increase capital spending in 2017 compared to 2016, citing expected sales growth, the need to replace equipment, and high capacity utilization. Employment outlook remained near March levels, with 46% of firms planning on increasing employment and 28% planning on increasing work hours.

Markit’s U.S. Flash Purchasing Managers Index (PMI) for April found a continuing slowdown in business activity growth from January’s 14-month high. The composite PMI dropped from 53.0 to a seven month low of 52.7, with drawdowns from both manufacturing (-0.5%) and services (-0.3%). Service provider job creation slowed to its lowest rate since February 2010, and manufacturers were faced with input price increases that outpaced increases in output prices.