INDUSTRY suffers biggest plunge on record.
WASHINGTON — American industry suffered the most severe plunge on record last month with factories, mines and utilities battered by the coronavirus pandemic.
The Federal Reserve said Friday that its industrial production index tumbled a record 11.2% in April. Manufacturing output also posted a record drop — 13.7% — as production of cars, trucks and auto parts plummeted more than 70%. Production of aerospace and other transportation products, metals and furniture fell about 20%. Output dropped 6.1% at mines and 0.9% at utilities.
The implosion of the U.S. industrial sector was not unexpected, but the scale of the collapse was stunning. Jennifer Lee, a senior economist at BMO Capital Markets, wrote “one can’t help but grimace.”
The Fed’s report also showed capacity utilization, which measures the amount of a plant in use, slid to 64.9%, the lowest in records dating back to 1967. At manufacturers alone, utilization dropped to 61.1%, an all-time low in data to 1948.
Manufacturing may get a boost over the coming week as auto plants begin reopening.
“Auto output at the large factories is slated to resume on Monday,” said Stephen Stanley, chief economist at Amherst Pierpont Securities, “so we should see a pickup in manufacturing activity in May. ”
Motor vehicle production slumped to a 70,000-unit annualized rate in April, compared with 11 million two months earlier, the Fed said.
Meanwhile, output fell 0.9% at utilities and decreased 6.1% in mining. Oil and gas
well drilling plummeted a record 28% as a collapse in crude prices prompted swift cutbacks in exploration. According to the latest Baker Hughes data, the oil and gas well rig count stood at 374 last week, the lowest in records back to 1974.
Manufacturers in the U.S. were among the first to experience the pandemic’s economic drag as producers fell victim to supply-chain disruptions, a severe weakening in the exports market and a drop in domestic demand.
The Fed said the production
indexes were adjusted to account for the output of ventilators at motor vehicle assembly plants. Some car parts manufacturers are making ventilators at previously idled plants, the report said.
The industrial production report traces its roots back to the Woodrow Wilson administration. In 1919, when the nation was transitioning to a peacetime economy after World War I, the Fed began publishing monthly production data for a variety of goods. Three years later, it developed indexes of industrial activity within manufacturing, mining and agriculture.
The lockdowns and travel restrictions imposed to combat
covid-19 have brought economic activity to a nearstandstill. The United States lost nearly 21 million jobs last month, and unemployment surged to 14.7%, highest since the Great Depression.
U.S. gross domestic product — the broadest measure of economic output — is expected to crater at a 40% annual rate from April-June, biggest drop in records dating back to 1947.
The Commerce Department reported Friday that retail sales dropped a record 16% in April.