U.S. industrial production fell 0.6% in January, stemming in large part from an 8.8% plunge in the making of motor vehicles and auto parts.
Economists had forecasted a 0.1% increase.
The Federal Reserve said Friday that the manufacturing component of the index dropped 0.9% last month, reversing a 0.8% gain in December. Over the past 12 months, factory production has increased just 2.9%. Manufacturing of wood products, computers, electrical equipment, apparel and chemicals also fell in January.
The decline suggests a clear cooling at U.S. factories that could prompt a slower pace of growth this year compared to 2018. While job growth has been solid, other sectors of the economy are showing signs for caution. Consumers appeared to retreat in December as the Commerce Department reported that retail sales fell 1.2% from the previous month.
The size of the drop in industrial production may weigh on the U.S. dollar and see bond yields edge down slightly, said Andrew Grantham, senior economist at CIBC Capital Markets, in emailed commentary.
In contrast to today’s data, the Institute for Supply Management, an association of purchasing managers, said its manufacturing index improved to 56.6 in January, after dipping to 54.3 in December. Anything above 50 signals growth in manufacturing.
In the Fed’s industrial production report, utility output rose 0.4% as the winter caused more natural gas usage. Mining edged up 0.1%.
Compared to a year ago, overall industrial production is up 3.8%.