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Industrial Output Falls More Than Expected in March

Economic Indicators Reuters

U.S. industrial production fell more than expected in March as manufacturing and mining production decreased, the latest indication that economic growth braked sharply in the first quarter.

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Industrial output declined 0.6 percent last month after a downwardly revised 0.6 percent drop in February, the Federal Reserve said on Friday. Industrial production has fallen in six of the last seven months.

Economists polled by Reuters had forecast industrialproduction slipping only 0.1 percent last month after a previously reported 0.5 percent drop in February.

Industrial production fell at an annual rate of 2.2 percentin the first quarter after decreasing at a 3.3 percent pace in the fourth quarter. The report joined data on retail sales, business spending, trade and wholesale inventories in suggesting that economic growth slowed to crawl at the turn of the year.

Growth estimates for the first quarter are as low as a 0.2 percent annualized rate. The economy grew at a 1.4 percent rate in the fourth quarter. But given a buoyant labor market, the ebb in growth is likely to be temporary.

U.S. financial markets were little moved by the data.

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The industrial sector has been undermined by a slowingglobal economy and robust dollar, which have eroded demandfor U.S. manufactured goods. It is also being weighed down by lower oil prices that have undercut capital investment inthe energy sector, as well as an inventory correction.

But there are signs the worst of the industrial sector downturn is over, with recent manufacturing surveys turning higher. In addition, the dollar's rally has fizzled and oil prices appear to be stabilizing.

Last month, manufacturing output fell 0.3 percent, the biggest decline since February 2015, after slipping 0.1 percent in February. Manufacturing was dragged down by motor vehicle and parts production, which plunged 1.6 percent after rising 0.8 percent the prior month.

For the first quarter, manufacturing output rose at a 0.6 percent rate. In March, there were also decreases in the output of electronic equipment, appliances and components.

Mining production tumbled 2.9 percent as oil and gas welldrilling plummeted 8.5 percent after diving 15.8 percent in February. Last month's drop in mining output was the largest since September 2008, when output was curtailed because of hurricanes. Mining production has declined in each of the last seven months.

A plunge in oil prices since June 2014 has hurt the profits of oil-field companies like Schlumberger <SLB.N> and Halliburton <HAL.N>, leading to deep cuts in their capital spending budgets.

Unseasonably warm weather in March hurt utilities production, which fell 1.2 percent after declining 3.6 percent in February.

With output declining last month, industrial capacity use fell 0.5 percentage point to 74.8 percent, the lowest level since August 2010. Officials at the Fed tend to look at capacity use as asignal of how much "slack" remains in the economy and how muchroom there is for growth to accelerate before it becomesinflationary.

 

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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