Industrial production in September fell for the first time since January, further evidence that the nation's factories are slowing.
The Federal Reserve said Tuesday that industrial production dropped by 0.6 percent, on the heels of August's unchanged performance. Meanwhile, output in the manufacturing sector fell 0.3 percent, with the output of utilities plunging 4.4 percent and mining output expanding at a 0.7 percent clip. The falloff in output at utilities reflected a drop in electricity production as the weather cooled.
The 0.6 drop in production was much larger than what economists had been expecting, and was the biggest decline since a 1.3 percent drop in September 2005, which took place after Hurricane Katrina.
“There was little good news in the report," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "High-tech and petroleum refining were the only bright spots in an otherwise broad-based industrial decline. Housing and motor vehicle activity is clearly declining and these industries will have very poor fourth-quarter performances. The decline in demand associated with the big ticket consumer industries, combined with the fact that manufacturing inventories are generally too high and need to be trimmed, is a recipe for a period of slow industrial growth.”
The Fed said production in all major market groups declined between August and September. Among durable consumer goods, the production indexes for automotive products and for appliances, furniture and carpeting both fell by about 2.5 percent.
Industries for which output fell by 1 percent or more included wood products, nonmetallic mineral products, machinery, motor vehicles and parts, furniture and related products, and electrical equipment, appliances, and components.
The manufacturing utilization rate in September fell 0.4 percentage point, to 80.8 percent. Capacity utilization for total industry dropped 0.6 percentage point, to 81.9 percent, still higher than the rates recorded from mid-2000 to early 2006.