U.S. factory output falls for a third time in 4 months

U.S. FACTORY OUTPUT Manufacturing output contracted 0.5% in April. / BLOOMBERG FILE PHOTO/TY WRIGHT/GETTY IMAGES
U.S. FACTORY OUTPUT Manufacturing output contracted 0.5% in April. / BLOOMBERG FILE PHOTO/TY WRIGHT/GETTY IMAGES

NEW YORK – United States factory production fell in April for a third time in four months with a broad decline led by weakness in machinery and motor vehicles, adding to signs of manufacturing sector weakness.

Manufacturing output contracted 0.5% after an unchanged reading the prior month, according to Federal Reserve data Wednesday that missed all estimates in Bloomberg’s survey. Total industrial production, which also includes mines and utilities, also decreased 0.5% after the March figure was revised up to a 0.2% gain from a previously reported drop.

Key insights

The report shows manufacturing losing momentum amid a trade war with China that’s raised prices and complicated business decisions. Those headwinds are poised to strengthen after President Donald Trump this month threatened fresh tariffs. Production of motor vehicles and parts fell the most in three months, while machinery output shrank the most since 2014. Business equipment fell the most since 2013 while output of consumer goods decreased the most since January, the Fed said. The data add to other signs of sluggishness in the sector, including recent declines in regional Fed factory gauges from Philadelphia to Dallas and Richmond. Still, a New York Fed report released earlier Wednesday showed activity in the region rebounded in May to the strongest level since November.

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What Bloomberg’s economists say

“Escalating trade tensions extracted a toll on April industrial production. Of course, the latest round of tariff increases is not yet reflected in this data, but threats over the past several months contributed to a stockpiling of goods. This created an inventory overhang that continues to weigh on production,” said Carl Riccadonna, Bloomberg’s chief U.S. economist.

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Capacity utilization, measuring the amount of a plant that is in use, decreased to a 14-month low of 77.9% from 78.5%. Utility output shrank 3.5%, the most in four months, after rising the prior month. Mining production advanced 1.6% for the first rise in four months. The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up about 75% of total industrial production, accounts for about 12% of the U.S. economy.

Katia Dmitrieva is a reporter for Bloomberg News.