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US Factory Output Rises in Broad Gain

Production rose for most major durable goods industries, including a 1.6% jump in the output of machinery.

U.S. factory output increased in August by more than forecast in a broad advance that signals manufacturing may be starting to stabilize.

Production at manufacturers rose 0.5%, Federal Reserve data showed Tuesday, exceeding the median estimate in a Bloomberg survey of economists, after falling the prior month. Total industrial production, which also includes output at mines and utilities, increased 0.6%, the most in a year as crude oil extraction bounced back after Hurricane Barry depressed drilling in the Gulf of Mexico a month earlier.

Key Insights

The gain marks a welcome respite from the deterioration in manufacturing since the start of the year. The industry slipped into a recession during the first half of 2019 amid slowing overseas demand, exacerbated by an ongoing trade war with China. While domestic demand may help cushion producers from a deeper slowdown, the risk is that output could remain anemic in coming months.

Production rose for most major durable goods industries, including a 1.6% jump in the output of machinery and a 0.9% increase in fabricated metals.

Production of motor vehicles decreased 1%, the most in four months; excluding cars, manufacturing output climbed 0.6%, the most in a year, after a 0.5% decrease the prior month.

Output of business equipment increased 1%, the most in a year, while production of construction supplies rose 0.9%.

Capacity Utilization Rises

Total capacity utilization, measuring the amount of a plant that is in use, rose to 77.9% from 77.5%.

Utility output increased 0.6% after surging 3.7% the prior month. Mining production rose 1.4% after falling 1.5%. Oil and gas well drilling fell 2.5%, the fourth decline in the last five months.

Output of consumer goods rose 0.2%, while production of non- durable goods advanced 0.5%.

The median estimate for factory output in the Bloomberg survey called for a 0.2% gain after a 0.4% decline in July.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up about three-fourths of total industrial production, accounts for about 11% of the U.S. economy.

By Katia Dmitrieva, with assistance from Kristy Scheuble.

TAGS: Operations
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