Decision Time for U.S. Economy in This Week's Data Points: Roland
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 per cent, 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 per cent, the most in a year as crude oil extraction bounced back after Hurricane Barry depressed drilling in the Gulf of Mexico a month earlier.
- 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 per cent jump in the output of machinery and a 0.9 per cent increase in fabricated metals.
- Production of motor vehicles decreased 1 per cent, the most in four months; excluding cars, manufacturing output climbed 0.6 per cent after a 0.5 per cent decrease the prior month.
- Output of business equipment increased 1 per cent, while production of construction supplies rose 0.9 per cent.
- Total capacity utilization, measuring the amount of a plant that is in use, rose to 77.9 per cent from 77.5 per cent.
- Utility output increased 0.6 per cent after surging 3.7 per cent the prior month. Mining production rose 1.4 per cent after falling 1.5 per cent. Oil and gas well drilling fell 2.5 per cent, the fourth decline in the last five months.
- Output of consumer goods rose 0.2 per cent, while production of non- durable goods advanced 0.5 per cent.
- The median estimate for factory output in the Bloomberg survey called for a 0.2 per cent gain after a 0.4 per cent 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 per cent of the U.S. economy.