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October 16, 2018 10:45 AM, EDT

September Manufacturing Production Rises on Broad Demand

Manufacturing Rogelio V. Solis/Associated Press

Factory production expanded in September for a fourth consecutive month on broad-based demand as the sector accelerated in the third quarter, Federal Reserve data showed Oct. 16.

Factory output increased 0.2% after rising an upwardly revised 0.3%. Total industrial production, which also includes mines and utilities, increased 0.3% after an unrevised 0.4%. Capacity utilization, measuring the amount of a plant that is in use, was unchanged at 78.1%.

The report showed most categories are supporting industrial output with gains across consumer goods, business equipment and industrial materials.

Factory output increased 2.8% at an annual rate in the third quarter, slightly faster than the prior three-month period, the Fed said in the report. That’s in sync with the Institute for Supply Management’s factory index, which remains near the highest level of this expansion.

Overall output growth in September was held down slightly by Hurricane Florence, with an estimated impact of less than 0.1 percentage point, the Fed said. Florence, which made landfall Sept. 14, caused widespread devastation and power outages in North and South Carolina.

Economists expect continued data volatility because of Hurricane Michael, which shut down offshore oil production in parts of the Gulf of Mexico and led to power outages in the Florida panhandle this month.

Excluding motor vehicles, manufacturing production rose 0.1% after a 0.1% decrease the prior month. Industry reports show vehicle sales grew in September at the fastest pace since March.

While strong consumer demand and lower corporate taxes signal manufacturing will keep expanding, the sector faces headwinds, including rising costs for materials and supply constraints linked to tariffs and trade tensions with China.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75% of total industrial production, accounts for about 12% of the U.S. economy.

Utility output was unchanged after surging 1.1% the prior month. Production of motor vehicles increased 1.7% after surging 4.3% in the prior month. Construction-goods output fell 0.6% after rising 0.3%. Mining production rose 0.5%; oil and gas well drilling fell 1.4%, the third consecutive decline. Production of consumer goods grew 0.2%, and output of business equipment increased 0.8%. Machinery production rose 0.9%.