In April, US factories reduced production dramatically, as automakers sold fewer vehicles and the other industries also cut output.
According to the Federal Reserve manufacturing output fell 0.4% last month compared with March, accounting for the third decline in the past four month and the biggest since October 2012. Vehicle production dropped 1.3% last month, but automakers say the drop is temporary as they already see stronger sales.
Overall industry production, which includes output at mines and utilities, fell 0.5%, the steepest drop since August. Utility output dropped 3.7%, after power output got back to more normal levels after a cold March.
The Institute for Supply Management said that its factory index dropped to 50.7 from 51.3 in April 2012, with 50 being the line between growth and contraction. According to the ADP Research Institute private payrolls increased 119,000 in April, the lowest level since September. Factories have begun to pull back as there is no need to rebuild inventories, consumer spending is restrained by higher payroll taxes and the across-the-board federal budget cuts take hold.
“Manufacturing is stalling a bit,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York. “Hiring has probably slowed a little. For the Fed, it’s going to be full speed ahead.”