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US industrial output falls, signals weak Q1 GDP growth
[WASHINGTON] US industrial production fell more than expected in March as manufacturing and mining production decreased, the latest indication that economic growth braked sharply in the first quarter.
Industrial output declined 0.6 per cent last month after a downwardly revised 0.6 per cent drop in February, the Federal Reserve said on Friday. Industrial production has fallen in six of the last seven months.
Economists polled by Reuters had forecast industrial production slipping only 0.1 per cent last month after a previously reported 0.5 per cent drop in February.
Industrial production fell at an annual rate of 2.2 per cent in the first quarter after decreasing at a 3.3 per cent pace in the fourth quarter. The report joined data on retail sales, business spending, trade and wholesale inventories in suggesting that economic growth slowed to crawl at the turn of the year.
Growth estimates for the first quarter are as low as a 0.2 per cent annualised rate. The economy grew at a 1.4 per cent rate in the fourth quarter. But given a buoyant labour market, the ebb in growth is likely to be temporary.
US financial markets were little moved by the data.
The industrial sector has been undermined by a slowing global economy and robust dollar, which have eroded demand for US manufactured goods. It is also being weighed down by lower oil prices that have undercut capital investment in the energy sector, as well as an inventory correction.
But there are signs the worst of the industrial sector downturn is over, with recent manufacturing surveys turning higher. In addition, the dollar's rally has fizzled and oil prices appear to be stabilizing.
Last month, manufacturing output fell 0.3 per cent, the biggest decline since February 2015, after slipping 0.1 per cent in February. Manufacturing was dragged down by motor vehicle and parts production, which plunged 1.6 per cent after rising 0.8 per cent the prior month.
For the first quarter, manufacturing output rose at a 0.6 per cent rate. In March, there were also decreases in the output of electronic equipment, appliances and components.
Mining production tumbled 2.9 per cent as oil and gas well drilling plummeted 8.5 per cent after diving 15.8 per cent in February. Last month's drop in mining output was the largest since September 2008, when output was curtailed because of hurricanes. Mining production has declined in each of the last seven months.
A plunge in oil prices since June 2014 has hurt the profits of oil-field companies like Schlumberger and Halliburton, leading to deep cuts in their capital spending budgets.
Unseasonably warm weather in March hurt utilities production, which fell 1.2 per cent after declining 3.6 per cent in February.
With output declining last month, industrial capacity use fell 0.5 percentage point to 74.8 per cent, the lowest level since August 2010.
Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.