The numbers: Industrial production edged up 0.1% in February, the Federal Reserve reported Friday. The gain was below Wall Street expectations of a 0.4% rebound after a sharp drop in the prior month. January output was revised up to a 0.4% drop from the prior estimate of a 0.6% decline.
What happened: In February, the gains were concentrated in utility output and mining. Manufacturing fell 0.4%, the second straight monthly decline. The drop in manufacturing output in January was revised to a 0.5% decline from the prior estimate of a 0.9% fall.
Economists were expecting auto production to recover in March after a steep drop in the prior month, but that didn’t happen. Auto output fell a slight 0.1% in March after a revised 7.6% decline in January.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the auto sector is “wobbling” after a clear softening in sales.
Capacity utilization fell slightly to 78.2% in February from 78.3% in the prior month. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities. It’s well below pre-recession levels, above 80%, that could fan production costs and prices.
Big picture: Manufacturing is slowing down, the only question remaining is by how much. In February, the ISM manufacturing index fell to 54.2, its lowest level since November 2016. The overall economy is clearly losing momentum in the first quarter, and the Federal Reserve has moved to the sidelines.
Market reaction: Stocks were set to open higher on Friday as there were signs the global economy might not be as weak as feared. The Dow Jones Industrial Average
has been higher in three of the last four trading days.