Industrial production fell by 0.5 percent in January, the biggest drop in almost a year and a half.
The Federal Reserve said Thursday that output in the manufacturing sector dropped by 0.7 percent, largely the result of a falloff in the motor vehicles and parts sectors.
The factory operating rate, at 79.6 percent, was the lowest manufacturing utilization rate since October 2005. The production of durable goods decreased 1.3 percent in January despite gains of more than 1 percent for computer and electronic products and for aerospace and miscellaneous transportation equipment. Declines of 0.5 percent or more were registered in wood products, nonmetallic mineral products, primary metal, machinery, motor vehicles and parts, and miscellaneous manufacturing.
The production of nondurable manufacturing edged down 0.2 percent in January and was just 0.3 percent above its year-ago level. Declines occurred in textile and product mills, paper, printing and support, and chemical production. Apparel and leather, petroleum and coal, and plastics and rubber registered increases.
“January’s decline in industrial activity basically offset the gain reported in December," said Daniel Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "Clearly, the unusually mild weather in December and severe cold weather in January had a large part to play in the up-and-down pattern over the last two months. A combination of other factors, though, continues to depress manufacturing activity. Two of the largest markets for manufactured items, housing and motor vehicles, are declining; inventories were excessive; and overall economic growth has decelerated a notch."
The output of utilities rebounded 2.3 percent, as temperatures moved back toward seasonal norms, while the output of mines moved down 1.2 percent.
At 111.9 percent of its 2002 average, overall industrial output for the month was 2.6 percent above its January 2006 level. The rate of capacity utilization in January fell 0.6 percentage point, to 81.2 percent. Even so, it was 0.1 percentage point above its year-earlier level and 0.2 percentage point above its 1972-2006 average.
The output of business equipment fell 1.6 percent in January; declines in transit equipment and in industrial and other equipment more than offset an increase of 0.9 percent in information processing. A large decrease in truck assemblies held down production in transit equipment despite a further gain in commercial aircraft. Lower production of construction equipment and of farm machinery contributed to a drop of 2.8 percent in the index for industrial and other equipment, which left it at about the same level as in November. The output of defense and space equipment increased 1.2 percent.
The output of construction supplies fell 1 percent in January after an upwardly revised gain of 1.8 percent in December; production in January was 2.8 percent below its year-earlier level. The output of business supplies edged up in January for a second consecutive month. The production of non-energy materials dropped in January, while the output of energy materials was unchanged. Within non-energy durables, the production of both durable and nondurable materials fell. Declines in indexes related to motor vehicle parts contributed to the drop of 3.7 percent for consumer parts; the production of other durables was pulled down by production declines in metals and lower output in stone mining and quarrying and in sand and gravel mining.
