US industrial production dragged down by mining slump

US industrial production in April was dragged down by a drop back in utilities output, as the earlier weather-related distortion was unwound, and a sharp decline in oil & gas drilling. The 0.3% m/m fall in industrial production last month was worse than the consensus estimate of no change, but actually a bit better than the 0.6% m/m drop we had been braced for.

Utilities output fell by a further 1.3% m/m in April, following a 5.4% m/m decline in March. Those declines mean that utilities output is now back down to a normal level following the massive surge during the winter months, when the Northeast suffered its coldest winter on record.

The 0.8% m/m decline in mining output was mainly due to a 14.5 % m/m fall in oil & gas drilling. Over the past 12 months, drilling activity has fallen by 46.5%, matching the slump in the active drilling rig count. But that adjustment appears to be all but complete now and, following the most recent rebound in crude oil prices, anecdotal evidence indicates that shale oil firms are even preparing to boost drilling activity again.

Disappointingly, manufacturing output was unchanged in April, with a rebound in motor vehicle production offsetting broad based declines in consumer goods and business equipment production.