Industrial Production Contracts in February

Industrial production fell -.5% MoM in February, this was a much larger decline than the -.1% predicted by consensus. This was the first decline since the -.6% MoM drop in October of last year. In addition, the capacity utilization rate was much weaker than expected at 80.9% (consensus 81.2%, prior 81.5%), and the lowest reading since 2005. The major reason for the surprisingly large decline was large -3.7% MoM drop in utility usage. This caused the headline figure to decline by -.4% MoM all by itself. Slower auto production (-1% MoM) eased manufacturing lower by -.2% MoM. Excluding vehicles, factory output fell -.2% MoM and industrial production fell -.5% MoM. Furniture and other wood products production each fell around 3% MoM as the housing slump continues. Overall, manufacturing fell -.2% MoM, with machinery orders the bright spot at +.3% MoM +2.2% YoY). Over the past year, industrial production has risen +1% YoY. Excluding high-tech and vehicle production, industrial production has risen +1.5% YoY. Manufacturing has risen +1.7% YoY, with vehicle production falling -2.7% YoY. Utility production has fallen -5.4% YoY. The main growth over the past year has been in computers, home electronics, and info processing. The largest declines have been in consumer goods and construction supplies. It appears that the weakening domestic economy is now overpowering the rebound in foreign demand, and export growth is no longer able to keep industrial production expanding. This data will further reinforce belief that the U.S. economy has entered a recession.