Industrial, manufacturing indexes hit record lows in April

by Jeff Della Rosa ([email protected]) 275 views 

Total industrial production fell 11.2% in April, the largest monthly drop in the 101-year history of the index, as the COVID-19 (coronavirus) pandemic led factories to slow or stop operations throughout the month, according to the Federal Reserve.

Manufacturing output fell a record of 13.7% as all major industries reported decreases. The output of motor vehicles and parts fell more than 70%. Production elsewhere in manufacturing declined by 10.3%. The indexes for utilities and mining fell 0.9% and 6.1%, respectively.

The level of total industrial production, at 92.6% of its 2012 average, fell 15% in April, from the same month in 2019. Capacity use for the industrial sector declined 8.3 percentage points to 64.9% in April, and the rate was 14.9 percentage points below its long-run (1972-2019) average and 1.8 percentage points below its all-time (since 1967) low set in 2009.

The index for consumer goods fell 11.7%, with a 36% drop in consumer durables, a 3.3% decrease in consumer energy products and a 6.2% decline in consumer non-energy nondurables. A 61.9% decrease in automotive products had the largest impact on the weakness in consumer durables, while the decline in consumer energy products contributed to a decrease in fuels that was partially offset by an increase in sales by utilities to residences. The production of business equipment fell 17.3% as a result of a 60.3% decrease in transit equipment that could be attributed to month-long closures of most factories producing motor vehicles and civilian aircraft. The indexes for construction supplies and business supplies fell 12.6% and 9.9%, respectively. The output of materials decreased by 9.9%, with a 17.2% drop in durables and decreases of 7.2% and 5.1% for nondurables and energy, respectively.

Manufacturing production, at 85.5% of its 2012 average, fell to its lowest level since August 1997. The index for durable manufacturing fell 19.3%. Among its components, motor vehicles and parts had the largest decline. The shutdowns of most motor vehicle plants led to light vehicle production at an annual rate of 70,000 vehicles, down from the rate of 11 million vehicles in February. Among other durable goods industries, declines of nearly 20% were reported by primary metal products, aerospace and miscellaneous transportation equipment and furniture and related products. The index for nondurables fell 8.2%, with declines of about 20% for textile and product mills, apparel and leather, printing and support and petroleum and coal products. The output of other manufacturing, including publishing and logging, fell 10.4%.

Among the components of utilities, a decline in electric utilities was mostly offset by a rise in natural gas utilities that could be attributed to strong demand for heating because of cold temperatures. Among the components of mining, the largest decreases were in crude oil extraction, oil and gas well drilling, coal mining and non-energy mining. The index for oil and gas well drilling decreased by 28%, the largest decline since 1972.

Capacity use for manufacturing fell 9.7 percentage points to 61.1% in April, from March. The capacity use was 2.6 percentage points below the rate in June 2009, the lowest point during the Great Recession. The operating rate for durable manufacturing fell to 55.3% and dipped below the 2009 low as a result of decreases in every major industry group. Capacity use for nondurables also fell to a record low of 68%, down 6.1 percentage points.

The combined value of distributive trade sales and manufacturers’ shipments, adjusted for seasonal and trading-day differences but not for price changes, declined 5.2% to $1.38 trillion in March, from February, according to the U.S. Census Bureau. The value fell 4.9% from March 2019.

Manufacturers’ trade and inventories, adjusted for seasonal variations but not for price changes, declined 0.2% to $2.01 trillion in March, from February. The inventories declined by 0.3% from March 2019.

The total business inventories/sales ratio based on seasonally adjusted data was 1.45 in March. The ratio was 1.38 in March 2019.

The April report on the manufacturing and trade statistics is set to be released June 16.