Industrial production in the U.S. unexpectedly declined in August for the first time in seven months as automobile making cooled.
Output at factories, mines and utilities fell 0.1 percent after a 0.2 percent gain the prior month that was smaller than previously reported, figures from the Federal Reserve showed today in Washington. The median forecast in a Bloomberg survey of 79 economists called for a 0.3 percent rise. Automakers scaled back following the biggest surge in almost five years.
Faster wage gains are needed, alongside improving payrolls and consumer confidence, to trigger a more broad-based pickup in consumer spending that’ll bolster more manufacturers. At the same time, recent data — including the strongest auto sales in eight years and improving business investment — signal the slowdown will probably be short-lived.
“It’s still a mixed bag, though overall conditions are improving,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “There was probably some giveback in August” for auto production so “the numbers should be taken with a grain of salt. It’s all part of a gradual recovery. We’ll see a moderate pace of growth.”
Stock-index futures were little changed after the report. The contract on the Standard & Poor’s 500 Index maturing in December was 1,977 at 9:18 a.m. in New York compared with 1,976.7 at the close on Sept. 12.
Estimates of economists in the Bloomberg survey ranged from a drop of 0.5 percent to an increase of 1 percent. The July reading was previously reported as a gain of 0.4 percent.
Another report today showed manufacturing in the region covered by the Federal Reserve Bank of New York expanded in September at the fastest pace since October 2009. The bank’s so-called Empire State index climbed to 27.5 from 14.7 in August. Readings greater than zero signal growth.
Manufacturing output, which makes up 75 percent of total production, dropped 0.4 percent last month, also the first decline since January, the Fed’s industrial production report showed. That followed a 0.7 percent gain in July that was smaller than previously estimated. The Bloomberg survey median projected a 0.1 percent gain for manufacturing, which accounts for about 12 percent of the economy.
Today’s Fed report also showed capacity utilization, which measures the amount of a plant that is in use, declined to 78.8 percent from 79.1 percent the prior month.
Utility output increased 1 percent, after dropping 2.7 percent in July. Mining production, which includes oil drilling, climbed 0.5 percent.
The output of motor vehicles and parts decreased 7.6 percent, the biggest drop since May 2009. That was a payback from a 9.3 percent surge in July that was the largest since September 2009. It probably also reflects difficulty in seasonally adjusting the data as fewer plants closed for new model-year retooling in July.
Excluding autos and parts, factory production increased 0.1 percent in August for a second month.
Industry data show vehicle sales will keep powering production in coming months. Sales of cars and light trucks rose to a 17.5 million annualized rate in August, the highest since January 2006, from a 16.4 million pace a month earlier, according to data from Ward’s Automotive Group.
“The industry appears to be very strong at this stage in the recovery,” Erich Merkle, Dearborn, Michigan-based Ford Motor Co.’s sales analyst, said on a Sept. 3 sales call. “The long-term outlook remains favorable.”
Ford in August began building the sixth generation of its 50-year-old Mustang sports car at a Flat Rock, Michigan, factory that will export it to more than 120 countries.
Machinery production rose 0.3 percent and business equipment was little changed after jumping 1.2 percent in July, today’s report showed. Output of computers and electronic products increased 1.3 percent.
Recent data indicate a pickup is under way. The Institute for Supply Management’s manufacturing index climbed in August to the highest level since March 2011, the Tempe, Arizona-based group said on Sept. 2. The orders gauge was the strongest in a decade.
A surge in demand for airplanes helped push orders for durable goods up at a record pace in July, according to Commerce Department data issued in August.
Consumers are helping to drive demand as a firming job market, rising stock and home prices and a retreat in fuel costs make them more willing to spend. Retail sales climbed 0.6 percent in August, the most in four months, with broad-based strength reflected by gains in 11 of 13 categories, a report showed last week.