Industrial Output Off 0.5% in March; Setbacks in Oil, Steel, Auto Segments Cited

U.S. industrial production, beset by weakness in oil drilling, auto manufacturing and steel production, fell 0.5% in March for the second consecutive big decline, the government said Tuesday.

The Federal Reserve Board said the March decline followed a 0.7% February fall, the steepest setback in output at the nation’s factories, mines and utilities since the end of the last recession.

In both months, much of the weakness occurred in the petroleum industry, which has sharply curtailed exploratory drilling because of the steep declines in world oil prices.

The report said drilling activity plunged 17% in March and now stands 33% below where it was last December.

“The cutbacks in energy have been substantial. They are spreading, and there is more damage to come,” said Donald Straszheim, chief economist for the investment firm Merrill Lynch & Co.

Biggest Setback in 3 1/2 Years

The report said production of new cars and trucks fell 10.7% in March with car assemblies dropping to an annual rate of 7.7 million units, down from 8.7 million in February. The production cutback was blamed on weak sales and excessive dealer inventories.

The February and March declines in industrial output were the largest consecutive setbacks since September and October, 1982, the low point of the last recession.

The weakness left industrial production at 125.1% of its 1977 average, only 0.9% above where it was a year ago.

By industry, manufacturing production fell 0.5% in March following an 0.8% February decline. The production of durable goods--items expected to last three or more years--plunged 1% last month, while production of non-durable goods edged up a tiny 0.2%. Production in the mining industry fell by 1.1% following a huge 3% February decline. Both setbacks were attributed to the big drop in oil and gas drilling.

Production at the nation’s utilities edged down 0.1% after rising 1.7% in February.

Output of consumer goods fell for the third consecutive month, a 0.7% decline, while production of business equipment was down 1.3%, with big cutbacks occurring in production of transit and farm equipment. Production in the defense and space industries rose 0.6% after two months of declines.