U.S. PRODUCTION DOWN
U.S. industrial output slowed in March, a sign that weakness persists for manufacturers and the energy industry.
Industrial production—a broad gauge of output across U.S. factories, mines and power plants—decreased a seasonally adjusted 0.6% in March from the prior month, the Federal Reserve said Friday. Output has fallen for six of the past seven months. From a year earlier, industrial production decreased 2% in March. Manufacturing output, the largest component of the index, fell 0.3% in March.
Weakness in the industrial sector is more evidence of cooling in the economy since the start of the year and raises concerns about the ability for the U.S. to generate sustained stronger growth when the global economy is faltering.
The latest industrial production decline was steeper than economists projected and stands in contrast to other reports showing the manufacturing sector is starting to find its footing.
"It is likely that the inventory correction and stronger dollar continued to weigh on the output data" in the first months of the year, J.P. Morgan Chase & Co. economist Daniel Silver said. "We remain hopeful that the worst of the drags from these factors have passed and that activity will pick up shortly."
Factory production sputtered much of last year due to a strong dollar causing American-made goods to become relatively more expensive abroad. Also a slowdown in the energy industry caused a pullback in demand for heavy equipment, steel and other materials.
There had been signs of those affects leveling off. The dollar has recently weakened against many other currencies and oil prices have stabilized this year.
Institute for Supply Management data, released this month, showed U.S. factory activity expanded in March for the first time since last summer. A separate report from the Federal Reserve Bank of New York released Friday showed factory activity in the Empire State rose to its best level in more than a year this month.
The Fed's national report showed March's manufacturing decline was led by weaker production of motor vehicles and parts and of electrical equipment, appliances and components. Production of computers increased last month. Compared with a year earlier, manufacturing output was up 0.4% in March.
Overall capacity utilization, a measure of industrial slack, slipped by 0.5 percentage point to 74.8% in March. The reading is more than 5 percentage points below the average since 1972.
The mining sector, which is heavily tied to energy firms, has been the largest and most consistent drag out industrial output over the past year. Mining output is down 12.9% over the past 12 months.
The sector's output decreased by 2.9% in March, the largest monthly drop for the category since September 2008 when production was curtailed due to hurricanes. The latest decline "reflected substantial cutbacks in coal mining and in oil and gas well drilling and serving," the Fed said.
The largest U.S. coal mining firm, Peabody Energy Corp., filed for chapter 11 bankruptcy protection on Wednesday, following several competitors in that sector.
Peabody's filing came "amid a historically challenged industry backdrop," said Peabody Chief Executive Glenn Kellow.
Utilities production dropped 1.2% last month, and declined 7.7% on the year. The March decline was due to a drop in output from natural gas utilities. Demand for heating and cooling, which is closely related to weather, strongly influences utility production.
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