US Industrial Production Unexpectedly Drops In March (After Huge Upward Revision For Feb)

At first glance the 0.5% MoM decline in US Industrial production (considerably worse than than the 0.1% MoM rise expected – and dragging YoY growth in IP down to +0.74%) is bad news… suggesting immediate impacts from the war are being felt and sparking headlines decrying President Trump’s actions.

Source: Bloomberg

However, while we agree that the decline is notable, the fact that February’s data was revised drastically higher, from +0.2% to +0.7% MoM, means that over the two months, industrial production overall is actually higher (and up 0.2% since the end of the war)…

Source: Bloomberg

Energy was behind the slowdown:

• March oil and gas drilling posted a decline of 2.4% m/m after rising 0.6% in Feb., Federal Reserve data show.

• March consumer energy products was decline of 2.1% m/m after rising 2.3% in Feb.

• March commercial energy products declined 0.3% m/m after increasing 0.8% in Feb.

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A similar picture evolves for Manufacturing production which fell 0.1% MoM in March (worse than the 0.1% MoM rise expected) after February’s 0.2% MoM rise was revised up 2x to a 0.4% MoM rise. Nevertheless, Manufacturing production YoY slowed to just 0.5%…

Source: Bloomberg

Bottom Line: it’s not great news that industrial production is slowing… but it’s not as dire as it looks at first glance (and remember Manufacturing PMIs were strong)…

…and energy production is unpredictable at best in the current environment.