Manufacturing Output Increases for Second Straight Month

auto factory
Machines work on an assembly line at Ford's Chicago Assembly Plant in 2019. (Amr Alfiky/AP)

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U.S. factory production rose slightly in August as resilient business investment more than offset a pullback in the output of consumer goods, consistent with steady manufacturing activity.

The 0.1% increase in manufacturing output last month followed an auto-fueled 0.6% July increase, Federal Reserve data showed Sept. 15. Including mining and utilities, total industrial production fell 0.2% in August.

The median forecast in a Bloomberg survey of economists called for a 0.1% decline in factory output and no change in total industrial production.

While domestic demand is generally holding up, manufacturers face a number of headwinds including a shift in consumer behavior toward services and away from goods. That change in preferences caught some retailers flat-footed, leading to an inventory overhang and canceled orders that are further weighing on production.

Foreign demand is at risk of softening at well, as an energy crisis grips Europe, China’s economy cools and a surge in the value of dollar raises the costs of U.S. goods for overseas customers.

A pair of regional Fed bank surveys on Sept. 15 showed mixed results. A gauge of manufacturing in New York state snapped back in September on firmer orders and shipments after plunging in the prior month. At the same time, the Philadelphia Fed’s gauge contracted for the third time in four months.

Among industry groups, factory production for machinery, aerospace equipment, and computers and electronic products increased. Meantime, motor vehicles output fell after a robust advance in the prior month. Consumer goods production also fell, reflecting a drop in food, clothing and energy.

Excluding autos, factory production increased 0.2%. The Fed’s report also showed capacity utilization at factories held at 79.6%.

Outside of manufacturing, utility output fell 2.3% on a decline in electricity. Mining was unchanged after five straight months of gains. Oil and gas well drilling rose 2.7%.

— With assistance from Kristy Scheuble and Olivia Rockeman.

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