Coronavirus Economy: Industrial Production Falls By Most In A Century, Autos Dropping 70%

Total U.S. industrial production took its biggest monthly drop in more than a century in April, falling 11.2 as the coronavirus pandemic forced factories across the country to cut production or close entirely, the Federal Reserve reported Friday. Production of motor vehicles and parts was off 70% as automakers made plans to reopen plants next week.

The “only silver lining is that manufacturers are easier to reopen although not at full capacity than many retailers, sports, arts and entertainment venues with social distancing intact,” said Diane Swonk, chief economist at Grant Thornton. The “largest manufacturers [already] have experience with protocols in hot spots in China and Italy.”

Compared with last year, total industrial production was off 15%.

The Fed report said aside from the autos sector, manufacturing was off 10.3% and capacity utilization was off 8.3 points to 64.9% -- 14.9 points below its 1972-2019 average and 1.8 points below the previous low set in 2009 amid the Great Recession.

“All major market groups recorded decreases in production in April. The index for consumer goods fell 11.7%, with a drop of 36% for consumer durables, a decline of 3.3% for consumer energy products, and a decrease of 6.2% for consumer non-energy nondurables,” the Fed said. “The weakness in consumer durables was led by a drop of 61.9% in automotive products while the decline in consumer energy products reflected a decrease in fuels that was partly offset by an increase in sales by utilities to residences.

“The production of business equipment decreased 17.3%, held down by a drop of 60.3% in transit equipment that resulted from essentially month-long closures of most factories producing motor vehicles and civilian aircraft. The indexes for construction supplies and business supplies declined 12.6% and 9.9%, respectively. The output of materials fell 9.9%, with a drop of 17.2% for durables and decreases of 7.2% and 5.1% for nondurables and energy, respectively.”

The Institute for Supply Management’s manufacturing survey showed 131 consecutive months of growth came to a crashing halt last month, falling 41.5% and new orders off 15.1%. Paper products and food, beverage and tobacco products were the only sectors showing growth in new orders.

“The data supports that fact that this is the fastest rate of change in modern economic times,” ISM survey chair Timothy Fiore told reporters. He added: “I think we're still in for four to six weeks of decline, but not at the rate that we saw going into April.”