The numbers: Industrial production fell 0.3% in December, the third decline in the past four months, the Federal Reserve reported Friday.
The decline was in line with Wall Street expectations of a 0.3% fall, according to a MarketWatch survey. The softness in the factory sector was telegraphed in the December unemployment report released last week, where manufacturing shed 12,000 jobs.
For the fourth quarter as a whole, industrial production was down at a 0.5% annual rate. Production was down in three of the four quarters of 2019. Output was down 1% on a year-over-year basis.
What happened: Manufacturing output rose 0.2% in December, but was down at a 1% rate for the fourth quarter. The gain in December came despite a 4.6% drop for output of motor vehicles and parts. Assemblies of cars fell to 10.3 million units in December from 11.2 million in the prior month. There have been reports that automakers are planning to reduce production in 2020 in face of projections of slower sales.
Mining output rose 1.3% in December on higher oil and gas extraction. Utility output fell 5.6% as warmer weather reduced the demand for home heating.
Capacity utilization fell to 77% in December, the second lowest reading in 27 months. 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 economists believe could fan production costs and prices.
Big picture: The manufacturing sector hurt by the decline in global trade, trade tariffs with China and Boeing Co.’s problems with the 737 MAX airplane
The ISM factory index sank in December to its lowest level since the Great Recession. Some economists think the sector could hit bottom in the first quarter.
What are they saying? “The trend in manufacturing output probably is about flat, with no real prospect of any serious improvement in the near term,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note prior to the data’s release.
Market reaction: Stocks
were set to open higher after a strong report on home construction.
Source : MTV