Industrial, manufacturing production declined by largest amounts in 74 years in March

by Jeff Della Rosa ([email protected]) 403 views 

Total industrial production declined 5.4% in March as the COVID-19 (coronavirus) pandemic led many factories to suspend operations late in the month, according to the Federal Reserve. Manufacturing output fell 6.3% in March while most major industries reported decreases, with the largest decline in motor vehicles and parts.

The Federal Reserve recently released data on industrial production and capacity use for March, and the estimates in the release incorporated data on stay-at-home orders and other information on industrial activity for late in the month.

The decreases for total industrial production and manufacturing were the largest since January 1946 and February 1946, respectively. The indexes for utilities and mining fell 3.9% and 2%, respectively. The level of total industrial production, was at 103.7% of its 2012 average, fell 5.5% in March, from the same month in 2019. Capacity use for the industrial sector fell 4.3 percentage points to 72.7% in March, a rate that is 7.1 percentage points below its long-run (1972-2019) average.

All major market groups experienced production decreases in March. The index for consumer goods fell 5.9%, with an 18.9% drop in consumer goods, a 5.3% decline in consumer energy products and a 0.9% decrease in consumer non-energy nondurables. A 27.2% decline in automotive products contributed to the weakness in consumer durables, while decreases in fuels and utilities negatively impacted consumer energy products. The production of business equipment decreased by 8.6% as transit equipment fell 22.8%, reflecting cutbacks in the output of motor vehicles and civilian aircraft. The indexes for construction supplies and business supplies fell 5.8% and 6.7%, respectively. The output of materials declined by 4.3%, with a decrease of about 8% for durables and decreases of less than 3% for nondurables and energy.

Manufacturing output declined at an annual rate of 7.1% in the first quarter. In March, the index for durable manufacturing declined by 9.1%. Motor vehicles and parts had the largest decline of its components, and output fell 28%. The following durable goods industries had decreases of between 8% and 10%: fabricated metal products, aerospace and miscellaneous transportation equipment, furniture and related products and miscellaneous manufacturing. The index for nondurables declined 3.2%, with larger declines in many industries but smaller decreases of 2% or less in food, beverage and tobacco products, paper and chemicals. The output of other manufacturing, including publishing and logging, fell 5.4%.

The output of utilities fell 3.9% in March with similar decreases in electric and natural gas utilities. Mining output fell 2% with the largest decline in crude oil extraction, natural gas liquids extraction, coal mining and non-energy mining.

Capacity use for manufacturing was 70.3% in March and 4.7 percentage points lower than in February and 7.9 percentage points below its long-run average. The operating rate for durable manufacturing fell to 67.8% and was about 9 percentage points below its long-run average. The rate was negatively affected by decreases in every major industry group. Capacity use for nondurables decreased 2.5 percentage points to 73.9%, about 6 percentage points below its long-run average. Use rates for printing and support, for textile and product mills and for apparel and leather all had decreases of nearly 10 percentage points or more.

The combined value of distributive trade sales and manufacturers’ shipments, adjusted for seasonal and trading-day differences but not for price changes, fell 0.5% to $1.46 trillion in February, from January, according to the U.S. Census Bureau.

The Census Bureau recently announced manufacturing and trade inventories and sales for February.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, decreased 0.4% to $2.01 trillion in February, from January. The inventories declined 0.1% in February, from the same month in 2019.

Total business inventories/sales ratio, based on seasonally adjusted data, was 1.37 in February, down from 1.39 in the same month in 2019.