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 cut 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 the volatile motor-vehicle sector. Autos fell 8.8% in January. 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. The Empire State Index that is more forward-looking, was moderately positive.

What are they saying? “Manufacturing is under real pressure from the slowdown in China and the trade war, and we expect output to drift down over the first half of the year, putting the sector into a mild recession. This won’t kill the rest of the economy, but it won’t look good, either, and until the sector bottoms out in the late spring it will make the Fed’s recent dovish turn look like the right move,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Market reaction: The Dow Jones Industrial Average DJIA, +0.51% jumped more than 350 points early Friday as U.S.-China trade talks reportedly showed progress.

Related: Empire State manufacturing index rebounds modestly in February