Manufacturing Output Up Slightly in September

Oct. 17, 2011
Industrial production increased 0.2% in September after having been unchanged in August.

After having gained 0.3% in August, manufacturing output moved up 0.4%, the Federal Reserve announced on Oct. 17.

Industrial production increased 0.2% in September after having been unchanged in August.

For the third quarter as a whole, industrial production rose at an annual rate of 5.1%.

Capacity utilization for total industry edged up to 77.4%, a rate 1.7 percentage points above its level from a year earlier but 3.0 percentage points below its long-run (1972-2010) average.

"With a mixed performance in September, the U.S. manufacturing sector now seems to have fully recovered from the supply chain shocks caused by the Japanese tsunami," said Cliff Waldman, economist for the Manufacturers Alliance/MAPI. "Annualized manufacturing growth for the third quarter of 2011 registered a moderate 4.3%, something of a relief after the essentially flat growth seen during the second quarter, but well off the first quarter growth rate of 7.2%. Mixed into the third quarter performance and the September report is a range of factors that reflect short-term recovery from the Japanese and Middle East shocks that so distorted economic activity during the first half of the year as well as clear indications of a slowing global economy and a sluggish and uncertain U.S. economy. The schisms between consumer goods output and business equipment output as well as between durable and nondurable manufacturing performance are well indicative of the swirl of murky factors that are creating so much short-term uncertainty.

"Consumer goods output during August and September was flat and would have been negative had it not been for continued strength in automotive production in the wake of the normalization of auto supply chains," Waldman added. "Business equipment output continued its strong showing of the past three months as capital spending, while historically sluggish, at least seems responsive enough to what are still decent profit margins to continue growing well above the rate of gross domestic product. As has been the case for most of the year, durable manufacturing output growth was far stronger than nondurable performance during September.

"However, even within the durable manufacturing sector, there were vulnerabilities that may foreshadow a further weakening in total U.S. factory sector performance," he noted. "The output of primary and fabricated metals industries, key suppliers for a wide swath of manufacturing supply chains, turned negative and machinery output has been weak since July. The murky outlook for the U.S. economy and clear signs of significant stresses in the global growth environment, most importantly in large emerging market economies, suggest that there are downside risks for U.S. manufacturing. A modest slowing is the most likely outcome, but something worse cannot be ruled out."

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