U.S. industrial production recorded a sharp fall with several factories and mines forced to stop activity in the midst of the ongoing COVID-19 crisis. On a sequential basis, industrial production fell 11.2 percent in April, the largest month fall in records that date back 101 years.
Motor vehicle & parts production fell 71.7 percent in the month, the largest on record. The second largest was the 30 percent fall seen in March. The fall is expected to be only temporary as the nation works its way through these difficult times.
The overall manufacturing output fell 13.7 percent. Meanwhile, utilities dropped only 0.9 percent, significantly small considering the number of places that were shut down; possibly working from home is resulting in some increased utility usage and providing an offset. Mining activity dropped 6.1 percent.
Capacity utilization fell 8.3 percentage points to 64.9 percent in April. The accompanying note from the Federal Reserve stated that this is “a rate that is 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.”
“Unlike the outlook for consumer spending, which we expect to snap back into positive territory in the third quarter, the outlook for manufacturing is not terribly bright”, noted Wells Fargo in a research report.
Even after a phased re-opening of the nation is underway, the manufacturing sector would still be beset by delays from suppliers.
“The weak global economy and the low price environment for oil and other commodities suggest diminished interest in taking on new projects for the mining sector. For all these reasons we anticipate industrial production will remain in negative territory throughout the entire course of 2020 before gradually improving in 2021”, added Wells Fargo.
