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Industrial production falls for the first time since June

REAL ECONOMY BLOG | September 15, 2022

Authored by RSM US LLP

Industrial production fell by 0.2% in August, the first decline in three months, amid a slowdown in manufacturing and a sharp drop in electricity production.

At the same time, mining outputs were flat, likely driven by lower oil prices as demand stalled.

Industrial production

After a year and a half of robust growth, running at 0.5% on average, industrial production volume has shown signs of cooling down. August’s three-month moving average growth was down to 0.1%.

Together with the strong labor market, industrial production has been a bright spot, keeping the economy from descending into a recession.

Given the decline in core retail sales data released on Thursday, there is reason to be worried about economic activity moving forward.

But even with a slowdown looming, the Federal Reserve will not back off in its commitment to raise interest rates and tame inflation.

Inside the data

Manufacturing production rose by 0.1% on the month, driven by machinery, computer and electronics outputs. Autos, on the other hand, fell by a sharp 1.4%.

Utilities dropped by 2.3% because of lower electricity demand, while natural gas production picked up by 0.6%.

Mining, which accounts for 15.5% of total industrial production, was unchanged.

As demand slowed down, capacity utilization fell by 0.2 percentage points to 80%, mostly driven by lower capacity used in mining and utilities.

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This article was written by Tuan Nguyen and originally appeared on 2022-09-15.
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