Factory output in US declines on weaker auto production

Washington - A slump in motor vehicle production pushed down US factory output unexpectedly in July, Federal Reserve data showed on Thursday.

Highlights of industrial production (July)

• Factory output dropped 0.1% (est. 0.2% gain) after 0.2% gain.

• Total industrial production, which also includes mines and utilities, increased 0.2% (est. 0.3% rise) after a 0.4% rise.

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

Key takeaways

Automobile production fell 3.6% in July, the fourth decline in the last five months. That reflected a slowdown in sales that were a bright spot for the economy in recent years.

While factory production excluding automobiles increased, the data showed some other areas of softness. Output of business equipment and construction materials dropped for the second time in three months.

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.

The Fed said the data were inadvertently posted early on its website. The report was scheduled for release at 9:15 in Washington.

Economist view

“Recent national ISM survey data point to much improved conditions in the manufacturing sector (as do the less reliable regional indices), ”  Joshua Shapiro, chief US economist at Maria Fiorini Ramirez, 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.”

Other details

• Capacity utilisation, measuring the amount of a plant that is in use, held at 76.7% (matching est.)

• 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%, while production of construction materials dropped 0.4%.

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