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US industrial production had the worst month since 1946, with coronavirus containment procedures shutting down manufacturers and crippling supply chains worldwide. Factory output fell 6.3% in March following a mere 0.1% drop in February, far worse than the 4.1% drop excepted. Overall industrial production including mining and utilities output also saw the worst performance since 1946, dropping 5.4% vs. 4% expected. April performance is likely to be even worse.

Key Takeaways

• Factory output fell 6.3% vs. the 4.1% drop expected in March and 0.1% drop the month before.
• Industrial production fell 5.4% compared to 4% decline expected in March.
• Capacity utilization fell from 77% to 72.7%.

Annual industrial production fell to the lowest point since November 2009, falling 5.49%, and this is likely to drop further in the following report, as many nonessential businesses didn’t close down throughout the US until early April. In March, motor vehicle production fell 28%, the largest monthly decline since January 2009. Machinery output fell 5.6%, utility output fell 3.9%, and mining production fell 2% with the ongoing oil price war leaving less incentive for drilling. Capacity utilization ticked downward to the lowest level since April 2010, falling from 77% to 72.7%.

Worse than feared, industrial production plummeted 5.4% in March, displacing the September 2008 monthly decline as the largest over the past 6 decades. We can expect to see more figures like this in the coming weeks as coronavirus takes hold in the data. pic.twitter.com/V7CAWL1H00

— Steven Rattner (@SteveRattner) April 15, 2020

Factories throughout the US have been impacted not just from quarantine protocols affecting workers, but from the massive international disruption seen to supply chains as well. With the coronavirus pandemic following hot on the heels of the US/China trade war, this marks an especially difficult period for manufacturers throughout the US.

Fed Data

The Fed stated that it had introduced data gathering adjustments to account for the effect of the nationwide shutdown, applying measures similar to those used for natural disasters. "Most major industries posted decreases, with the largest decline registered by motor vehicles and parts," the Fed said. "The decreases for total industrial production and for manufacturing were their largest since January 1946 and February 1946, respectively." 

Market Reaction

Gold prices have seen a strong correction in today’s session following very strong gains earlier in the week. Spot gold last traded at $1,720.30/oz, down -.94% with a high of $1,738.56/oz and a low of $1,709.57/oz.

Gold prices have largely ignored the catastrophic economic data released simultaneously on Wednesday morning, indicating record drops in retail sales and in New York area manufacturing activity. Prices have faced selling pressure as a natural correction to previous gains, and the overall climate for gold is arguably still bullish in the near-term.