US manufacturing output dropped by the most in just over 74 years in March as the novel coronavirus pandemic fractured supply chains, suggesting business investment contracted further in the first quarter.
The Federal Reserve said on Wednesday manufacturing production plummeted 6.3 percent last month, the biggest decrease since February 1946. Data for February was revised down to show output at factories slipping 0.1 percent instead of edging up 0.1 percent as previously reported.
Economists polled by Reuters had forecast manufacturing output dropping 3.2 percent in March.
The Fed said “the estimates in this release incorporated data on stay-at-home orders as well as other information on industrial activity for late in the month.”
Production at factories dropped at a 7.1 percent annualized rate in the first quarter, the sharpest since the first quarter of 2009, after decreasing at a 0.5 percent pace in the October-December period. Manufacturing, which accounts for 11 percent of the US economy, was already struggling from the fallout of the Trump administration’s trade war with China well before the before the coronavirus hit US shores.
In addition to disrupting global supply chains, the highly contagious virus, which causes a respiratory illness called COVID-19, has depressed demand for crude oil, undercutting spending by oil producers on drilling and shaft exploration equipment. Business investment has contracted for three straight quarters, the longest such stretch since the Great Recession. That downturn appears to have deepened in the first quarter.