WASHINGTON (Reuters) – Production at U.S. factories rose in August amid a decline in auto assembly plants, but gains in production of machinery, computer products and electronics pointed to underlying strength in manufacturing.
The Federal Reserve said Thursday that industrial production rose 0.1% last month after rising 0.6% in July. Economists polled by Reuters had expected factory production to be unchanged. Production increased by 3.3% compared to August 2021.
Manufacturing, which accounts for 11.9% of the US economy, is slowing as spending shifts back to services from goods.
Higher interest rates as the Fed fights inflation as well as slowing demand abroad and a stronger dollar are headwinds for factories.
Production at auto plants fell 1.4% last month. Auto production rose 3.2% in July, helped in part by seasonal factors that were not repeated in August. Excluding autos, manufacturing rose 0.2%.
The production of long-term manufactured goods has not changed. A gain of at least 1.0% was recorded by makers of machinery, computer and electronic products as well as miscellaneous aviation and transportation equipment. However, it was offset by losses of more than 1% reported by producers of wood and furniture products.
Production of non-durable manufactured goods rose 0.2%.
Mining production was unchanged in August after posting five consecutive monthly gains. Utilities production fell 2.3%. As a result, overall industrial production fell 0.2% in August after rising 0.5% in July.
Capacity utilization in the manufacturing sector, a measure of how fully companies are using their resources, was unchanged at 79.6% in August. It is 1.4 percentage points higher than its long-term average. The total energy use of the industrial sector fell 0.2 percentage point to 80.0% last month. It is 0.4 percentage point higher than its 1972-2021 average.
Fed officials tend to look at capacity utilization metrics to indicate how much “slack” there is in the economy — how long growth can go before it becomes inflation.