Manufacturing Output in U.S. Unexpectedly Declined in September

(Bloomberg) - U.S. manufacturing output unexpectedly fell in September, the first drop in five months, suggesting a setback for factories as the pandemic drags on.
The 0.3% drop in production at the factories followed an upwardly revised 1.2% increase in August, Federal Reserve data showed on Friday. Economists predicted a 0.6% increase, according to a Bloomberg poll of economists. Total industrial production, which includes mines and utilities, fell 0.6% in September.
The fall in September underscores a slowdown in production at the end of a robust third quarter as industrial production increased 39.8% on an annualized basis. However, the figure shows an extended recovery period for factories due to supply chain disruptions, limited capital investment, and weak export growth.
"The goods manufacturing industry has rebounded faster than the service industry, but activity cannot slow down as the general economic recovery fades," Oren Klachkin, senior US economist with Oxford Economics, said in a note. "In particular, the production of goods, for which demand has risen sharply after the pandemic, namely computers and cars, is losing momentum."
At the same time, a separate report on Friday showed a dynamic in US household demand towards the end of the third quarter. Retail sales rose more than forecast by 1.9% in September.
The Fed report showed that the decline in factory production reflected weakness in automotive and electronics production. Auto production fell 4% after falling 4.3% a month earlier, while computer and electronic product production declined 2.6% in September. Production excluding cars remained unchanged during the month.
October dates
Two regional Fed reports on Thursday showed that manufacturers' orders gained momentum as the fourth quarter began.
The usage rate of manufacturing facilities fell to 70.5%, well below the 75.2% in February prior to the store's closure, today's report showed. Overall capacity utilization, which includes mines and utilities, decreased from a revised 72% to 71.5%.
The latest industrial usage rate remains below 76.9% in February. Overcapacity weighs on corporate profits as capital is underutilized and also signals that corporate investment in new equipment will continue to be squeezed and weigh on economic growth.
The Fed's report showed utility performance fell 5.6% while mining rose 1.7%, the first increase since January. Oil and gas drilling increased by 3.5%.
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