With the coronavirus pandemic leading many factories to suspend operations late in the month, the Federal Reserve released a report on Wednesday showing the biggest monthly drop in U.S. industrial production in over seventy years in the month of March.
The report said industrial production plunged by 5.4 percent in March after rising by a downwardly revised 0.5 percent in February.
Economists had expected production to tumble by 4.0 percent compared to the 0.6 percent increase originally reported for the previous month.
The Fed said the bigger than expected nosedive in industrial production reflected the biggest monthly decrease since January of 1946.
Manufacturing output led the way lower, plummeting by 6.3 percent in March after edging down by 0.1 percent in February. Most major industries posted decreases, with the largest decline registered by motor vehicles and parts.
The report said utilities output also tumbled by 3.9 percent in March after spiking by 7.0 percent in February, while mining output slumped by 2.0 percent after sliding by 1.3 percent.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said the steep drop in production “highlights that while coronavirus containment measures are primarily slamming the brakes on service sector activity, the manufacturing sector is also set for a significant downturn.”
Capacity utilization for the industrial sector decreased to 72.7 percent in March from 77.0 percent in February, falling to a rate that is 7.1 percentage points below its long-run average.
The Fed said capacity utilization in the manufacturing sector fell to 70.3 percent in March from 75.0 percent in February, while capacity utilization in the mining and utilities sectors dropped to 86.3 percent and 72.7 percent, respectively.
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