US Industrial Output Continued To Slide In March

Manufacturing output in the US contracted for the second straight month in March, according to this morning’s update from the Federal Reserve. The slide weighed on the broader measure of industrial production, which slumped a hefty 0.6% last month. The decline pushed the year-over-year trend for industrial activity deeper into the red. The news raises doubts about the nascent signs of a manufacturing turnaround via the sentiment data.

The ISM Manufacturing Index, a measure of the mood in the sector, ticked above the neutral 50 mark in March—the first sign of growth for this metric in seven months. But if that was a prelude of better days ahead for the battered manufacturing sector there was no sign of revival in today’s hard-data report from the Fed. Indeed, manufacturing’s slump deepened via the Fed numbers, with output diving 0.3% last month—a bit more than February’s 0.1% slide.

Monthly data is noisy, of course, but the year-over-year figures don’t look encouraging either. Industrial output in annual terms contracted again in March–the seventh consecutive month of annual red ink.


Using industrial production alone as a guide suggests that the US economy is in recession. But other indicators suggest otherwise, including yesterday’s numbers for initial jobless claims.

Stepping back and looking at a broad spectrum of market and economic indicators for the US continue to align with a low-recession risk posture. The industrial production data begs to differ, but that’s still the exception and its not yet obvious that a weak industrial sector is enough to kill economic growth writ large.

But note that the March report on retail sales delivered a surprisingly weak profile earlier this week. Is a recession signal creeping up on the US? This week’s two major economic numbers—retail spending and industrial production—aren’t helping the case for optimism, but there’s still no convincing signal that a new recession is fate via broadly defined measures of economic activity. Nonetheless, it’s clear that the US had a rough first quarter, which will likely be confirmed in the official Q1 GDP report that’s due on Apr. 29.

With the preliminary numbers for the March economic profile now in hand, the focus turns to April. The burning question: Will the weak numbers in Q1 spill over into Q2?

It’s too soon to say, although an early clue via today’s New York Fed manufacturing survey data for April implies that a rebound could be in the works. This regional measure of New York-area business conditions jumped to its highest level in more than a year for this month’s reading. That’s only one data point, of course, but at least the kickoff for this month’s data is off to a solid start.