U.S. Factory Output Fell in January on Boeing Production Halt
(Bloomberg) -- U.S.factory output fell in January on the production halt for Boeing (NYSE:BA)Co.'s 737 Max, showing how the grounding of the troubled plane will weigh on manufacturing and the broader economy in coming months.
Manufacturing output declined 0.1% from the prior month, matching projections, after a downwardly revised 0.1% gain in December, according to Federal Reserve data released Friday. Total industrial production, which also includes mines and utilities, fell 0.3% as unusually warm weather held down energy output.
While the Boeing stoppage will likely continue to hit the economy throughout the first half of the year, factory output excluding aircraft and parts rose 0.3% in January, signaling some stabilization in other manufacturing sectors. But the coronavirus outbreak is also expected to weigh on supply chains and demand in the coming months. Production of aerospace products and parts fell 9.1% in January, reflecting the 737 Max production halt. Boeing received zero orders for all aircraft in January, suggesting production will stay subdued. Together with consumption data, the factory output figures indicate the U.S. economy is off to a modest start this year. A separate report Friday showed that while retail sales gained in January, a narrower measure -- which some analysts see as a better gauge of underlying demand -- was sluggish. Utility output declined 4% from the prior month while mining production increased 1.2%. Production of motor vehicles and parts increased 2.4% for the second gain in three months; excluding cars, manufacturing fell 0.3% after a 0.5% increase in December.
Capacity utilization, measuring the amount of a plant that is in use, fell to 76.8% -- the lowest since September 2017 -- from 77.1%. Sectors with declines in January included machinery and consumer goods, while computer and electronic products along with fabricated metal gear showed gains. The Fed's monthly data are volatile and often get revised. Manufacturing makes up three-fourths of total industrial production and about 11% of the U.S. economy.