March Industrial Production Slumps Again, Down at 2.2% Rate For Q1


The Federal Reserve Industrial Production and Capacity Utilization report shows Industrial production decreased 0.6 percent in March.

Revisions took February to -0.6 from -0.5, and January from +0.6 to +0.5.

Is the weather to blame?

The report shows “For the first quarter as a whole, industrial production fell at an annual rate of 2.2 percent. A substantial portion of the overall decrease in March resulted from declines in the indexes for mining and utilities, which fell 2.9 percent and 1.2 percent.”

Econoday Economists’ Predictions

While pondering the effect of mining and utilities let’s take a peek at economists’ predictions.

The Bloomberg Econoday consensus estimate for industrial production was -0.1% in a range of -0.5% to +0.4%.

Where does Bloomberg find these optimists every month? It’s a mystery.


Regional reports have been signaling emerging strength for the factory sector which helps ease the sting from a second straight 0.6 percent contraction for industrial production, the latest report for March.

The manufacturing component, pulled down by a 1.6 percent decline in vehicle production, fell 0.3 percent following, after a downward revision, a 0.1 percent decline in February. Weakness in vehicle production is no surprise given declines underway in vehicle sales.

The report’s other two components are also in the negative column, at minus 1.2 percent for a second month of contraction for utilities and at a very steep minus 2.9 percent for mining which, showing no lift yet from the gain in oil prices, is now in contraction for seven straight months. Capacity utilization is also down, 5 tenths lower to 74.8 percent which is not a plus for factory employment.

The depreciation in the dollar and uptick in oil prices are pluses for manufacturing, a sector however that clearly showed no traction in March.

Note that the traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.

Recent History

Swings in utility output, typical at this time of year and especially evident during this winter’s unusual weather, often skew the headline for the industrial production which dropped 0.5 percent in February to mask a respectable 0.2 percent rise in the manufacturing component. Forecasters see overall production improving but still slipping by 0.1 percent in March with manufacturing slowing, to only a consensus 0.1 percent gain. This report, at consensus, would not raise the economic outlook.

Weather or Autos?

Bloomberg blames February the weather for masking a “respectable 0.2 percent rise in the manufacturing component” last month.

This month manufacturing was down 0.3% thanks to a 1.6 percent decline in vehicle production.

Econoday reports “Weakness in vehicle production is no surprise given declines underway in vehicle sales.”

Say What?

  • If autos were no surprise why did economists predict -0.1%?
  • What about the negative revisions?
  • And what about the economist who predicted +0.4%? Is he reading anything at all or is he simply from Bizarro World where up really means down?

Industrial Production 1990-Present

Industrial Production 2016-04-15A

Industrial Production Detail Since 2014

Industrial Production 2016-04-15

Realistically speaking, I see only one possible conclusion:

We’ve had bad weather for 13 of the last 16 months starting November 2014.

Mike “Mish” Shedlock