U.S. Industrial Production Up 0.2%

'The most likely near-term course for the U.S. manufacturing sector is positive but slowing growth,' economist says.

Industrial production increased 0.2% in August after having advanced 0.9% in July, the Federal Reserve reported on Sept. 15.

Manufacturing rose 0.5% in August, after a similarly sized gain in July, and the rates of change were revised down slightly in April, May, and June.

"The August report on industrial production showed that the U.S. manufacturing sector is at a crossroads, caught between a production rebound from the Japanese earthquake and the worrisome slowing of U.S. and global economic activity," said Cliff Waldman, economist for the Manufacturers Alliance/MAPI.

"In spite of recent data pointing to a near stall in U.S. GDP growth and a significant slowdown in world economic activity, manufacturing output in August managed a solid gain after a 0.6% gain in July," he added. "Nonetheless, the industry data were mixed and very telling of the forces that are swirling around the U.S. factory sector. Output gains in electrical equipment as well as motor vehicles and parts contributed to the solid August performance, likely a post-tsunami rebound as the supply chains in both sectors begin functioning normally. Encouragingly, there were also solid gains in aerospace and furniture output.

"There were also indications, however, that manufacturing is starting to feel the impact of a sharp U.S. economic slowdown and that the weakness demonstrated by regional and national leading indicators of manufacturing activity is slowly but surely showing itself in production data. Machinery output has contracted for two consecutive months. Nonmetallic mineral products output contracted as fabricated metal products output stalled. Further, nondurable manufacturing activity was sluggish, with marked contractions in food, textile, and printing output. The most likely near-term course for the U.S. manufacturing sector is positive but slowing growth. However, with the U.S. economy at a near standstill and world growth slowing quickly, a dimmer outlook for U.S. factories cannot be ruled out.

Capacity utilization for total industry edged up to 77.4%, a rate 1.9 percentage points above its level from a year earlier but 3.0 percentage points below its long-run (1972-2010) average.

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