U.S. industrial production rose slightly last month, improving on August’s unexpected decline but still showing the effects of low energy prices and the strong dollar.
Output increased 0.1% in September after falling a downwardly revised 0.5% the previous month, the Federal Reserve said Wednesday. The gain was in line with economists’ expectations, according to Reuters.
Of the industrial sector’s three categories, manufacturing output rose 0.2%, boosted by the production of goods such as textiles and plastics, while mining production rose 0.4% as gains in oil and gas well drilling offset a drop in crude oil extraction.
But those gains were offset by utilities production, which dropped 1.0% last month, despite unseasonably warm weather. “The drop in utilities output suggests slower consumer spending in the third quarter,” Reuters said.
Total factory production has increased in three of the past four months, but was flat in September from a year earlier. Industrial output rose at an annual rate of 1.8% in the third quarter, the first quarterly increase since the third quarter of 2015.
“Through the volatility, the trend in manufacturing is probably slightly better than flat and the plunge in mining seems to have ended,” Jim O’Sullivan, economist at High Frequency Economics, told The Wall Street Journal.
Reuters said the industrial sector downturn “has probably run its course,” but gains in output “are likely to be muted as the sector remains constrained by the lingering effects of the dollar’s past rally, a collapse in oil prices and weak global demand.”
With output tepid last month, industrial capacity use edged up 0.1 percentage point to 75.4%, and is 4.6 percentage points below its long-run average.
On the plus side, a survey early this month showed an acceleration in factory activity in September, and new orders for manufactured capital goods have increased since June.
“We look for modest growth in the manufacturing sector to continue as the worst of the effects of the strong dollar and inventory overhang pass,” Jesse Edgerton, an economist at JPMorgan in New York, told Reuters.