US Industrial Production Dips Amid Steep Drop In Mining Output

Manufacturing output dropped by a revised 0.4% in August, which was previously reported as a 0.5% drop.

Factory output fell in September for a second month as high inventories and lukewarm demand from overseas customers kept American producers bogged down. Mining output plunged 2 percent as energy companies sharply reduced oil and gas drilling. The August reading was revised up to 0.1 percent dip from a previously reported 0.4 percent decline, the Federal Reserve said.

Warmer-than-usual temperatures in September led to a 1.3% increase in the output of utilities.

Steven Ricchiuto, chief economist at Mizuho Securities, said that the auto industry was supporting the industrial sector. This continues to reflect a deceleration from the 4.5 percent pace observed in January. In contrast, machinery (up 0.7 percent), furniture and related products (up 0.4 percent), primary metals (up 0.4 percent), chemicals (up 0.3 percent) and motor vehicles and parts (up 0.2 percent) were among the manufacturing sectors with increased production for the month.

The drop in manufacturing output was due to lower production in durable goods, including electrical equipment and appliances, as manufacturers face a strong dollar that is weighing on exports and modest growth in the U.S. economy. With output declining, industrial capacity use fell to 77.5% from 77.8% in August.

Utilities production increased 1.3% in September. The only major market group to post a gain in September was consumer goods.

U.S. industrial production fell for a second straight month in September on renewed weakness in oil and gas drilling, the latest indication that the economy lost momentum in the third quarter.

Fed policy makers, weighing whether to raise interest rates this year for the first time since 2006, are monitoring economic data for signs that headwinds such as cooling overseas markets may be spilling over into the US and pose a risk to the expansion.