The Federal Reserve reported on Tuesday that industrial production unexpectedly fell by -0.1% in March, despite market expectations of a 0.1% gain. Compared to expectations, the last four readings for industrial production have been disappointing.
Key Takeaways
- US industrial production came in at -0.1% vs. 0.1% expected.
- After a -0.3% drop in January, production appeared to be recovering in February with a 0.1% gain.
- Q1 output dropped -0.3% overall at an annual rate after a 4% gain in Q4 2018.
The industrial sector has entered a period of decline with months of weak reports emerging one after the other. After 4% growth in Q4 2018, output has dipped to 0.1% in Q1, led by decline in manufacturing.
March manufacturing was flat after decline seen in January and February. Auto production dropped -2.5% in March, -4.5% annually, and -12.8% for Q1 which was the biggest decline in almost 8 years. While the auto industry can be somewhat volatile, the decline is likely a combination of the trade war tariffs and the knock-on effect of the VW emissions scandal which led to industry-wide recalls of multiple automobile models.
Construction and business equipment rose in March. Mining output fell -0.8%, dipping or remaining flat since December, although output is up 10.5% compared to March 2018. Utilities rose by 0.2%.
Capacity utilization saw the lowest reading since July at 78.8%. The rate of capacity utilization informs analysts of the limits of utilities, mines, and factories. The rate is still below those seen in pre-recession times (80%).
Another miss for the #economy - #industrial #production edged down 0.1% in March after edging up 0.1% in February. #manufacturing production was unchanged in March after declining in both January and February. # utilities rose 0.2% while #mining moved down 0.8%. pic.twitter.com/cOK93HculX
— Dr Thomas Kevin Swift (@DrTKSwift) April 16, 2019
Market Reaction
Gold has ticked downward following the news, continuing a downward trend seen earlier in the session. A rally in equities may be putting selling pressure on the precious metal today which is trading down -0.97% at $1,274.28/oz with a high of $1,288.75/oz and a low of $1,274.12/oz.
Stock markets in Asia, Europe, and the US mostly saw higher overnight activity with strong openings seen in the US stock market today, and gold prices have sunk to almost a four-month low.
Gold Price Chart
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