In another sign that economic growth slowed in the first quarter, U.S. industrial production fell more than expected in March, showing a 0.6% drop for a second month in a row.
For the first quarter as a whole, industrial production fell at an annual rate of 2.2%, the Federal Reserve said Friday. A substantial portion of the decrease in March reflected declines in the indexes for mining and utilities, which fell 2.9% and 1.2%, respectively, as well as a 0.3% drop in manufacturing output.
Economists polled by Reuters had forecast industrial production declining 0.1% last month. The February decline was revised to 0.6% from 0.5%.
“The industrial sector has been undermined by a slowing global economy and robust dollar, which have eroded demand for U.S. manufactured goods,” CNBC said. “It is also being weighed down by lower oil prices that have undercut capital investment in the energy sector, as well as an inventory correction.”
Industrial production has declined in six of the last seven months, with the mining index falling in each of the past seven months, at an average pace of 1.6% per month.
GDP growth estimates for the first quarter are as low as a 0.2% annualized rate. The economy grew at a 1.4% clip in the fourth quarter.
“Weakness in the industrial sector is more evidence of cooling in the economy since the start of the year and raises concerns about the ability for the U.S. to generate sustained stronger growth when the global economy is faltering,” The Wall Street Journal said.
CNBC noted, however, that there are signs the worst of the industrial sector downturn is over, with recent manufacturing surveys turning higher. In addition, the dollar’s rally has fizzled and oil prices appear to be stabilizing.
Institute for Supply Management data, released this month, showed U.S. factory activity expanded in March for the first time since last summer.
“It is likely that the inventory correction and stronger dollar continued to weigh on the output data” in the first quarter, JPMorgan Chase economist Daniel Silver told the WSJ. “We remain hopeful that the worst of the drags from these factors have passed and that activity will pick up shortly.”