Economic Report: Industrial production weakens further in March

Industrial production fell 0.1% in March, the Federal Reserve said Tuesday. This is the fourth straight month of weak readings. Read More...

Snow covers Fiat Chrysler Automobiles NV Jeep brand sports utility vehicles in Detroit. Auto production fell 12.8% in first quarter.

The numbers: Industrial production fell 0.1% in March, the Federal Reserve reported Tuesday. The gain was below Wall Street expectations of a 0.1% gain.

This is the fourth straight weak reading for industrial production. Production rose 0.1% in February after a 0.3% decline in January.

As a result, output in the first quarter slipped at a 0.3% annual rate after a 4% gain in the last three months of 2018. That’s the weakest since the third quarter of 2017.

What happened: Manufacturing output was unchanged in March after falling for the past two months. Auto production fell 2.5%. For the first quarter, auto production was down at a 12.8% annual rate, the biggest decline in almost eight years. Construction, material and business equipment had sizeable increases.

Mining production, which had been a bright spot last year, fell 0.8% in March, and has not increased since December. Output of utilities rose 0.2% in the month.

Capacity utilization fell to 78.8% in March, the lowest rate since last July. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities. It’s still below pre-recession levels, above 80%, that could fan production costs and prices.

Big picture: Industrial production has been weak for the past few months and there was no improvement in March. The global economy seems to be slowing, leading to softer export growth. Trade policy concerns from tariffs implemented and floated while the U.S. and China negotiate also have had an impact. The data will add to jitters about the outlook for the U.S. economy and keep the Federal Reserve on hold.

What they’re saying: “The factory sector has taken the brunt of the dislocations associated with tariffs and uncertainties around trade policy as well as dealing with the headwind of a stronger DXY, +0.02% Thus, it is not surprising that manufacturing activity is underperforming the overall economy ,” said Stephen Stanley of Amherst Pierpont Securities.

Market reaction: The Dow Jones Industrial Average DJIA, +0.17% rose early on Tuesday as investors examined a spate of corporate earnings. Yields on the 10-year Treasury TMUBMUSD10Y, +0.99% rose 2 basis points to 2.58%.