U.S. Industrial Production Declines in September

WASHINGTON (Reuters) – U.S. industrial production fell in September, impacted by a strike at Boeing and two hurricanes, including Helene.

Industrial output dropped 0.3% last month after a downwardly revised 0.3% gain in August, as reported by the Federal Reserve on Thursday. Economists polled by Reuters had projected a decline of 0.2% following a previously reported 0.8% increase in August.

The Fed indicated that the Boeing strike contributed 0.3% to the decline in industrial production, with two hurricanes accounting for another 0.3%.

Although the Fed did not specify the names of the hurricanes, it noted that Helene hit in September while Debby, which made landfall in August, was later downgraded to a tropical storm.

Year-on-year, industrial production fell 0.6%, with a third-quarter annualized rate decrease of 0.6%, contrasting with a 2.5% growth rate reported for the April-June quarter.

Factory output decreased 0.4% in September after advancing 0.5% in August, with a 0.5% year-on-year drop in factory production.

Manufacturing, comprising 10.3% of the economy, has largely stalled, with the anticipated benefits of interest rate cuts yet to materialize.

The U.S. central bank began its easing cycle with a significant half-percentage-point cut to a policy rate range of 4.75%-5.00% in September due to concerns over the labor market. This followed a total increase of 525 basis points in 2022 and 2023 aimed at controlling inflation.

Production of motor vehicles and parts declined 1.5%, while aerospace and miscellaneous transportation equipment output dropped significantly by 8.3%. Approximately 33,000 machinists at Boeing are on strike, leading to further supply chain disturbances.

Durable manufacturing production fell by 1.0%, yet nondurable manufacturing production saw a slight increase of 0.2%. Additionally, mining output decreased 0.6% following a 0.7% rise in August, while utilities production rebounded by 0.7% after a 1.3% decline.

Capacity utilization in the industrial sector, which indicates how efficiently firms are utilizing their resources, decreased from 77.8% in August to 77.5% in September, remaining 2.2 percentage points below the average from 1972 to 2023. The manufacturing sector's operating rate fell by 0.4 percentage points to 76.7%, which is 1.6 percentage points below its long-run average.