Ahead of the Bell: US Industrial Production

The industrial sector measured by the US central bank comprises manufacturing, mining, and electric and gas utilities.

“A decline in the August ISM manufacturing production index below the key 50 level for the first time since December 2015 and a 0.6% drop in factory production worker hours” pointed to a drop in manufacturing output, according to Wells Fargo’s Sam Bullard in a preview.

The most disappointing recent report was a sharp drop in the Institute for Supply Management’s manufacturing index, which fell to 49.4 in August.

Many durable goods industries reported drops of 1.0% or more.

“The weakness in retail sales and industrial production in August underline that the rebound in third-quarter GDP growth could be weaker than previously hoped, which is another reason for the Fed to pass on raising interest rates next week”, according to Capital Economics.

Manufacturing output was also down 0.4% in August, reversing its increase in July, while the index for utilities fell back 1.4%. That provides “a ray of light here”, Brown said. This comes after an increase of 0.6% in July, revised lower from 0.7%.

The output of mining moved up 1 percent in August, its fourth consecutive monthly increase following an extended downturn; the index, however, was still about 9 percent below its year-ago level.

For total industrial production, the Bloomberg survey median called for a 0.2 percent decrease.

Utility output fell 1.4 percent in August, the biggest decrease since March, after rising 2.1 percent the previous month, the Fed report showed.

USA retail sales fell 0.3% in August, according to the Census Bureau. Industrial production is now 1.1% below its year-ago level.

Looking more closely at the August data, durable and nondurable goods production declined 0.4 percent and 0.2 percent, respectively.