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Factory Output in U.S. Declines on Weaker Auto Production

Aug. 17, 2017
Automobile production fell 3.6% in July, the fourth decline in the last five months.

A slump in motor vehicle production pushed down U.S. factory output unexpectedly in July, Federal Reserve data showed on August 17.

Factory output dropped 0.1%. The largest drop was due to automobile production which fell 3.6% in July. This was the fourth decline in the last five months.

This sector had been a bright spot for the economy in recent years.

Manufacturing output minus motor vehicles rose 0.2%, reflecting a pickup in non-durable goods production

Total industrial production, which also includes mines and utilities, increased 0.2% after a 0.4% rise.

Other highlights of the report:

  • Capacity utilization, measuring the amount of a plant that is in use, held at 76.7%. -Utility output increased 1.6% after falling 1.2% the prior month.
  • Mining production rose 0.5%; oil and gas well drilling decreased 0.9% -Production of consumer goods increased 0.2%, reflecting a 0.8% advance in the output of non-durables including chemicals and food.
  • Output of business equipment fell 0.5%.
  • Production of construction materials dropped 0.4%

While manufacturing is projected to continue to grow, an acceleration in the near term would require bigger gains in household demand, business investment and stronger global sales.

The monthly data, which are volatile and often get revised, contrast with other recent reports. While the Institute for Supply Management’s factory index eased in July from the second-highest level since 2011, it showed steady growth in production, orders and employment. The latest Empire State Manufacturing survey for August also posted a strong gain.

“Recent national ISM survey data point to much improved conditions in the manufacturing sector (as do the less reliable regional indices), ”  Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., wrote after the report. “We expect the underlying trend of reported output to gradually accelerate in the months ahead, although ongoing inventory adjustment in the automotive sector will continue to weigh.”

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