Industrial output slumps in January

The numbers: Industrial production fell 0.3% in January, marking the fourth decline in the past five months, the Federal Reserve reported Friday.

The drop in January was in line with Wall Street expectations.

What happened: The decline mainly reflected warmer weather, which cut utility output, and a significant slowdown in civilian aircraft production. Boeing Co suspended 737 MAX production in January as it struggled to win regulatory approval of safety changes made to the aircraft following two deadly crashes.

Factory activity edged down 0.1% in January. Excluding civilian aircraft, manufacturing rose 0.3%.
Production of autos and parts rose 2.4% in January, a partial rebound from a 5.1% decline in the prior month. Utilities production fell 4% in January, because of the warm weather.

Mining production, which includes oil and gas extraction, rose 1.2% in January. Output of business equipment slumped 2.6%.

Capacity utilization fell to 76.8% in January, the lowest rate since September 2017. 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 continues to struggle, with Boeing’s woes only the latest in a long series of headwinds, including trade tension, the strong dollar and business uncertainty. However, the closely watched ISM factory index rose over the breakeven 50 level for the first time in five months in January. This has raised hopes the sector could show some resilience in coming months.