US Industrial Production Data Suggest Recovery Slowing

Industrial production posted another gain in August, continuing the string of gains since state reopenings began. However, the pace of growth slowed considerably, evidence that the recovery is running out of steam.

Industrial production rose by only 0.4%, well below the 1.2% increase expected, with declines in both utilities and mining production offsetting another manufacturing production increase.

Manufacturing production rose by 1.0%, well below the 2.2% gain expected. Motor vehicle production, however, fell by 3.7% after a string of sizable gains in the last three months.

Excluding motor vehicles, overall industrial production would have been up 0.6% and manufacturing production would have been up 1.4%, reflecting moderate strength in other manufacturing components.

Utilities production fell by 0.4%, with electricity production down 0.4% and natural gas production down 0.2%.

Mining production plunged by 2.5% after rising by 1.4% in July. The Federal Reserve partly attributed the August decline to the impacts of Hurricane Laura and Tropical Storm Marco. A rebound would be expected in the September data if the approaching Hurricane Sally weakens. As of this writing, though, that appears to be unlikely.

In other data released Tuesday morning, the September Empire State index rebounded after a decline in August. The overall index rose to 17.0 from 3.7 in August, well above the 6.0 reading expected.

The new orders index rose to 7.1 from -1.7, while the shipments reading rebounded to 14.1 from 6.7. The employment index ticked up to 2.6 from 2.4 in the previous month.

The six-month outlook rose to 40.3 from 34.3 in August, suggesting respondents see continued improvement through the remainder of the year and beyond.

The Philadelphia Fed index for September is expected to decline for a third straight month to 15.5 when it is released on Thursday. The index fell to 17.2 in August after dipping to 24.1 in July.

Kevin Kastner

Julie Ros

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