Manufacturing Output Dropped 6.3% in March, According to the Industrial Production and Capacity Utilization Report - Modern Distribution Management

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Manufacturing Output Dropped 6.3% in March, According to the Industrial Production and Capacity Utilization Report

Total industrial production fell 5.4% in March, as the COVID-19 pandemic led many factories to suspend operations late in the month.
people working with lumber on a manufacturing floor

Total industrial production fell 5.4% in March, as the COVID-19 pandemic led many factories to suspend operations late in the month, according to the latest Industrial Production and Capacity Utilization report from the Federal Reserve. Manufacturing output fell 6.3%; most major industries posted decreases, with the largest decline registered by motor vehicles and parts. The decreases for total industrial production and for manufacturing were their largest since January 1946 and February 1946, respectively. The indexes for utilities and mining declined 3.9% and 2.0%, respectively. At 103.7% of its 2012 average, the level of total industrial production in March was 5.5% lower than a year earlier. Capacity utilization for the industrial sector decreased 4.3% to 72.7% in March, a rate that is 7.1% below its long-run (1972–2019) average.

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

Manufacturing output dropped 6.3% in March and at an annual rate of 7.1% in the first quarter. In March, the index for durable manufacturing fell 9.1%; the most sizable decline among its components was in motor vehicles and parts, where output fell 28.0%. Durable goods industries that recorded decreases of between 8% and 10% included fabricated metal products, aerospace and miscellaneous transportation equipment, furniture and related products, and miscellaneous manufacturing. The index for nondurables fell 3.2%, with substantial 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 (publishing and logging) fell 5.4%.

The output of utilities declined 3.9% in March, with similarly sized decreases for both electric and natural gas utilities. Mining output fell 2.0%, with the largest decreases in crude oil extraction, natural gas liquids extraction, coal mining, and non-energy mining.

Capacity utilization for manufacturing in March was 70.3%, 4.7% lower than in February and 7.9% below its long-run average. The operating rate for durable manufacturing dropped to 67.8%, about 9% below its long-run average, held down by decreases in every major industry group. Capacity utilization for nondurables fell 2.5% to 73.9%, about 6% below its long-run average. Utilization rates for printing and support, for textile and product mills, and for apparel and leather all recorded drops of nearly 10% or more.

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