Industrial production slows
As the inventory rebuilding cycle wanes, industrial production last month grew just 0.2%, while output in July was downwardly revised from a preliminary estimate of 1.0% to 0.6%.
Simply put, the slowdown in manufacturing that had surfaced in numerous surveys is being detected by the Federal Reserve’s index of industrial output.
Much of the weakness came in a steep drop in auto output, which is a category that tends to be extremely volatile.
However, there were pockets of strength, including gains in high-tech equipment, semiconductors, construction supplies, consumer goods and business equipment (roughly 40% of output).
In the meantime, capacity utilization edged up from 74.6% in July to 74.7% in August, indicating that plenty of slack still remains in the economy. Readings near or above 80% would put the economy closer to capacity, which can unleash worries about inflation at the Fed.
The data are not pointing to an imminent slump, but it does highlight that the economy hit a soft patch.
Empire Manufacturing – slowing
The first look at September output comes in the form of the Empire Manufacturing Index, which is a look at conditions in New York.
The index fell by 3 points to 4.1, the lowest reading in over a year. A level of zero indicates neither growth nor contraction, therefore, the dip suggests a deceleration in growth.
However, new orders and shipments improved, suggesting stabilization at lower levels in the near term.
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