Industrial output slumps in January for fourth decline in past five months

Factory output ex-aircraft up 0.3% in the month

The numbers: Industrial production fell 0.3% in January, marking the fourth decline in the past five months, the Federal Reserve reported Friday (https://www.federalreserve.gov/releases/g17/current/g17.pdf).

The drop in January was in line with Wall Street expectations.

What happened: The decline mainly reflected warmer weather, which cut utility output, and a significant slowdown in civilian aircraft production. Boeing Co. (BA) suspended 737 MAX production in January as it struggled to win regulatory approval of safety changes made to the aircraft following two deadly crashes.

Factory activity edged down 0.1% in January. Excluding civilian aircraft, manufacturing rose 0.3%.

Production of autos and parts rose 2.4% in January, a partial rebound from a 5.1% decline in the prior month. Utilities production fell 4% in January, because of the warm weather.

Mining production, which includes oil-and-gas extraction, rose 1.2% in January. Output of business equipment slumped 2.6%.

Capacity utilization fell to 76.8% in January, the lowest rate since September 2017. The capacity utilization rate reflects the limits to operating the nation's factories, mines and utilities. It is well below prerecession levels.

Big picture: Manufacturing continues to struggle, with Boeing's woes only the latest in a long series of headwinds, including trade tension, the strong dollar and business uncertainty. However, the closely watched ISM factory index rose over the break-even 50 level for the first time in five months in January. This has raised hopes the sector could show some resilience in coming months.

What are they saying? "Looking ahead, the supply chain challenges posed by the coronavirus and Boeing production halt will combine with the steadfast headwinds from weak global growth and protectionist trade policies to prevent a resuscitation of manufacturing activity," said Oren Klachkin, an economist at Oxford Economics.

Market reaction: Stocks were mixed Friday as investors follow reports of the spread of the COVID-19 infection.

-Greg Robb; 415-439-6400; AskNewswires@dowjones.com


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  02-14-20 1112ET
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