Industrial output in March suffers largest drop since 1946

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The numbers: Industrial production fell 5.4% in March, the steepest decline since early 1946 as a result of the coronavirus pandemic, the Federal Reserve said Wednesday.

Capacity utilization fell down to 72.7% from 77%, the lowest level since the Great Recession of 2007-2009.

Economists polled by MarketWatch expected a 4.1% decline in production and capacity utilization of 73.8%.

What happened: There were declines across the board in March.

Manufacturing production fell 6.3% in March, the biggest drop since February 1946. Most major industries posted declines. Production of motor vehicles and parts declined 28%.

Mining output fell 2% in March and utility production fell 3.9%.

Big picture: The collapse was bigger than during the worst months of the Great Recessionn of 2007-2009, economists noted. Factories began shutting down late in March as the coronavirus pandemic forced social distancing. Economists think manufacturing conditions will continue to deteriorate in April. In the first look at April, the New York Fed’s manufacturing index, plummeted to a record low – 78.2.

What are they saying? “Very bad, but worse to come. Further big drops are likely in April, because lockdowns began to bite hard only in mid-March, so roughly half the month was largely unaffected by the virus crisis,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Market reaction: U.S. equity benchmarks traded in negative territory all day Wednesday after several weak economic indicators. The Dow Jones Industrial Average DJIA, -0.75% closed down 445 points at 23,504

Originally Published on MarketWatch

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