The numbers: Industrial production sank 0.6% in January, the first drop in eight months, the Federal Reserve reported Friday. The decline was below Wall Street expectations of a flat reading.
Adding to a sense of weakness in the report, industrial production in December was revised down to a 0.1% gain from the initial estimate of a 0.3% gain.
Despite the decline, production remains 3.8% higher in January than it was a year earlier.
Capacity utilization declined 0.6 percentage point to 78.2% in January, the lowest level since last July.
What happened: In January, all categories except mining and utility production declined. Manufacturing alone dropped 0.9%, led by slump in motor-vehicle assemblies. Excluding autos, factory output fell 0.2%.
Mining output edged up 0.1% in January. The output of utilities increased 0.4%.
Big picture: Economists didn’t think the firm December industrial output report would be repeated in January, but not many were calling for the across-the-board weakness seen in the data. This might be the tipping point for factory sector, but the separate ISM manufacturing index for January was stronger than December.
The manufacturing sector faces headwinds from slowing global growth, trade tensions and the strong dollar.
Market reaction: Stocks were set to open higher on optimism on U.S.-China trade talks. The Dow Jones Industrial Average
slumped more than 100 points on Thursday after a weak retail sales report.