Industrial production falls more than expected

Industrial production and capacity utilization fell more than expected in February.

Data from the Federal Reserve on Wednesday showed production dropped 0.5%, while 76.7% of productive capacity was used, down from 77.1% in January.

Production was dented by big drops in mining and utilities. Mining production dropped 1.4% as oil remained cheap, while utilities production collapsed 4% amid warmer weather.

“The large drop in mining in February resulted from decreases in crude oil extraction, coal mining, and oil and gas well drilling and servicing,” the Fed said. “Since late 2014, the index for oil and gas well drilling and servicing has fallen more than 60 per cent.”

Manufacturing production rose 0.2%, and is up year-on-year despite a drop in the aggregate number of hours worked. This suggests an increase in productivity in the sector, according to Renaissance Macro’s Neil Dutta in a note.

“The chart shows that manufacturing output has rebounded a bit over the past couple of months, pulling up the y/y rate,” wrote Pantheon Macroeconomics’ Ian Shepherdson in a note. “Surveys point to no further near-term acceleration, but the deterioration seen last year appears to be over.”

Economists had estimated that industrial production fell 0.3% in February, following a 0.9% rise in the prior period, according to Bloomberg. They had forecast that capacity utilization was 76.9%.

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