Federal Reserve Reports Manufacturing Output’s Largest Decline Since 1946
Data released by the Federal Reserve today showed that manufacturing across the country is at half-century lows in production due to fallout from the coronavirus pandemic. The Federal Reserve’s Industrial Production and Capacity Utilization report, published April 15, showed that total industrial production fell 5.4% in March, driven in large part by factory closures from later that same month.
Manufacturing output specifically fell 6.3%, at an annual rate of 7.1%. The 6.3% decline is the industry's worst drop since February 1946. Motor vehicles and parts were the worst hit manufacturing sector: Output there fell 28% as American automakers closed their plants and, in several cases, repurposed production lines to manufacture respirators, face shields, and other personal protective equipment.
Customer demand for automotive products fell 27.2%, reinforcing negative sales figures from auto retailers for the first quarter of 2020. Production of business equipment fell 8.6%, including a 22.8% drop in transit equipment as motor vehicle and aircraft companies stopped producing.
Durable goods industries saw drops across the board: fabricated metal products, aerospace and other transportation equipment, furniture and related products, and miscellaneous manufacturing sectors all recorded decreases of between 7 and 10%. Buoyed slightly by quarantined customers stocking up, the food, beverage, and tobacco products sector saw a decrease of less than 2%.
Capacity utilization in manufacturing, which measures how much factories are producing relative to available resources, fell 4.7 points to 70.3%.
Quarantines of nonessential industries, ensnared supply chains, and the threat of the coronavirus to employees have wreaked havoc on the economy at large, but the Federal Reserve’s data is another indicator that manufacturing, already vulnerable, has been hit particularly hard by the COVID-19 pandemic. Also on April 15, data released by the Empire State Federal reserve showed that in New York state, currently a hotspot for the virus in the United States, 85% of surveyed manufacturers reported deteriorating business conditions in March.