March Industrial Production Unexpectedly Drops; Oxford Economics Says Too Early to Blame War

01:24 PM EDT, 04/16/2026 (MT Newswires) -- US industrial production saw a surprise decrease in March, Federal Reserve data showed, though Oxford Economics said it's too soon to blame the Middle East conflict for the drop.

Industrial output fell 0.5% last month following an upwardly revised 0.7% growth in February, the Fed said Thursday. The consensus was for a 0.1% increase in March in a survey compiled by Bloomberg.

"Industrial production was unexpectedly weak in the first month that covered the US/Israel-Iran war," Oxford Economics Lead US Economist Bernard Yaros said in remarks e-mailed to MT Newswires. "However, we wouldn't draw too many conclusions from March's decline, which was driven by sharply falling output in the mining and utilities sectors."

Mining output dropped 1.2% last month, compared with a 2.1% rise in February, while utilities saw a 2.3% decrease after a gain of 1.8%, Fed data showed.

Manufacturing output fell 0.1% in March following a 0.4% rise the month prior. The durable manufacturing index shed 0.2%, largely weighed down by a 3.7% drop in the motor vehicles and parts component.

"Production of motor vehicles and parts was a notable drag on factory activity, and this is one of the most vulnerable segments within manufacturing to the consumer impact from oil price shocks," Yaros said.

Energy prices have soared amid the Iran war that started at the end of February, curtailing shipments through the crucial Strait of Hormuz. Over the weekend, US-Iran peace negotiations in Pakistan ended without a deal, but a two-week ceasefire between Washington and Tehran still holds.

"Since the outbreak of the Iran war, we have dialed back our forecast for growth in industrial production over the balance of 2026," Yaros said. "For now, the forecast doesn't anticipate any outright (quarter-over-quarter) industrial production declines, as key factors such as the (artificial intelligence) buildout and the investment incentives in last year's fiscal package will lend crucial support."

Earlier in the week, government data showed that producer prices growth steadied in March as wholesale costs of energy surged amid volatility stemming from the Middle East conflict.

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