The Federal Reserve Board said that industrial production increased 0.4 percent in September, partially recovering from its sharp 1.4 percent decline in August. The largest drivers of the gain (as well as the prior month’s fall) were in the mining and utilities sectors, with production in the two up 0.9 percent and 1.5 percent respectively in September.
In the manufacturing sector, production grew by 0.2 percent for the month, an improvement from the 0.9 percent loss the month before. Year-over-year growth has been 3.2 percent, a slowdown from earlier in the year. July 2011 to July 2012 gains in manufacturing production were 5.0 percent.
It is clear that manufacturing growth has been modest at best, with significant weaknesses apparent in the data. Capacity utilization remained at 76.8 percent in September, but it had stood at 78.0 percent as recently as February.
Looking at specific sectors, the largest monthly gains were seen in the aerospace (up 2.4 percent), electrical equipment and appliances (up 1.8 percent), apparel and leather (up 1.6 percent), and food and beverages (up 1.1 percent) sectors. The steepest declines were among motor vehicles (down 2.5 percent), printing (down 1.1 percent), primary metals (down 1 percent), and plastics and rubber (down 0.7 percent) sectors.
Today’s report reflects continued weaknesses in the manufacturing sector, even with the improvement in September. Growth among manufacturers has been disappointing in recent months, with softness in global sales and uncertainties in the U.S. market taking a definite toll. I would expect for this choppiness to continue in the coming months, especially with the looming fiscal cliff and slowness among our major trading partners on the minds of manufacturing leaders. In order to get things turned around Washington must act to address the fiscal cliff and other lingering issues that are slowing growth.
Chad Moutray is chief economist, National Association of Manufacturers.