Record Declines in March’s Economy

By at 15 April, 2020, 4:13 pm

Largest Drop in Industrial Production Since the Immediate Aftermath of World War II


by Raymond J. Keating-

More ugly data are rolling in regarding the grim state of the U.S. economy. Indeed, these numbers should remove any lingering doubts that a recession began during the first quarter of this year, given that we’re effectively experiencing record declines regarding the consumer and the industrial sector.

On April 15, the Census Bureau served up March retails sales data and the Federal Reserve supplied March industrial production numbers.

As for the consumer, retail sales plunged by 8.7 percent in March compared to February, and that came after a slight decline in February of 0.4 percent. The March decline was the largest drop looking at data going back to 1992. (See following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

A few areas of growth

In March, there were a few areas that saw growth – building materials and gardening supplies were up by 1.3 percent, food and beverage stores by 25.6 percent, health and personal care stores by 4.3 percent, general merchandise by 6.4 percent and nonstore retailers (i.e., online) by 3.1 percent. These numbers reflect consumers making purchases for hunkering down at home.

Industrial production dives

Meanwhile, industrial production unsurprisingly took a major dive in March, falling by 5.4 percent. That monthly decline was larger than during any month in the Great Recession (the largest drop in that period being -4.3 percent in September 2008). In fact, it was the largest monthly decline since the immediate aftermath of World War II (i.e., since January 1946).

Source: Federal Reserve Bank of St. Louis, FRED

It’s also worth noting that this data was fairly weak coming into March, with declines in December and January. All three major industry groups – manufacturing, mining and utilities – were off significantly in March.

Big decline for manufacturing

Zeroing in on manufacturing, which makes up the most significant portion of industrial production, it dropped by 6.3 percent in March, following small declines in January and February. That March decline also was larger than what occurred during any month in the Great Recession (that largest then being -3.5 percent in both September and December 2008). And again, it was the largest monthly decline since early 1946 (i.e., since February 1946).

Source: Federal Reserve Bank of St. Louis, FRED

The economic costs of shutting down the economy in order to save lives by limiting the spread of the coronavirus have been and will continue to be staggering.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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