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US Industrial Output Falls Again in September

Oct. 16, 2015
‘The headwinds in manufacturing — rising trade deficits, a decline in the supply chain of oil country goods, and high inventories — are at their worst now, so the good news is that the restraints in 2015 will ease going into 2016.’

U.S. industrial production fell in September for the second straight month, the Federal Reserve reported Friday, as manufacturing declined and mining was hit by cutbacks amid declining energy prices. Total industrial output fell by 0.2% in September after an upwardly revised 0.1% drop in August. (The August number was previously reported as a 0.4% decline.)

The September decline was half as steep as analysts expected. Year-over-year, the nation’s industrial activity rose a modest 0.4%.

The embattled manufacturing sector, which makes up about 75% of industrial production, continued to slow. Activity slipped 0.1% after a 0.4% drop in August.

The drop in manufacturing output was due to lower production in durable goods, including electrical equipment and appliances, as manufacturers face a strong dollar that is weighing on exports and modest growth in the U.S. economy.

“This report illustrates the significant headwinds faced by manufacturers in the current global economic environment, and it is hard not be disappointed by activity year-to-date,” said Chad Moutray, chief economist for the National Association of Manufacturers. “With that in mind, policymakers should seek to enact measures that will increase the competitiveness of the sector internationally to help buttress some of the headwinds in the market right now. This includes trade policies that help to open new markets for our products, but it also begs the need for comprehensive tax reform and smarter regulatory policies.”

Mining output fell a steep 2.0% in September as businesses continued to scale back in the face of low energy prices. Mining output was down 5.7% year-on-year.

The decline in mining output reflected sizable cuts in both the extraction of crude oil and the drilling of oil and gas wells, according to the Fed.

“Growth and decline in manufacturing industries was somewhat evenly spread in September,” MAPI Foundation chief economist Daniel J. Meckstroth said. “Production was down in 11 of the 20 major manufacturing industries. …The headwinds in manufacturing — rising trade deficits, a decline in the supply chain of oil country goods, and high inventories — are at their worst now, so the good news is that the restraints in 2015 will ease going into 2016.”

In other notes from the report, utilities output rose 1.3%, matching August’s gain. The central bank said the increase was led by warmer-than-usual temperatures that boosted demand for air conditioning.

Steven Ricchiuto, chief economist at Mizuho Securities, said that the auto industry was supporting the industrial sector. “Excluding autos, output growth is negative-0.1% on the year, showing that there is not much upside in the economy,” he said. “This report shows the economy is stuck and inflation bottlenecks are not building.”

Copyright Agence France-Presse, 2015

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