Industrial production in the U.S. shrank in August by the most since March 2009, reinforcing concern that a pillar of the expansion is faltering.
The 1.2 percent decrease at factories, mines and utilities followed a revised 0.5 percent gain in the prior month, figures from the Federal Reserve showed today. The median estimate in a Bloomberg survey of 81 economists called for production to remain unchanged. Manufacturing, which makes up 75 percent of the total, fell 0.7 percent.
A slowdown in global markets is keeping businesses from placing more orders, which may make it harder for companies like Texas Instruments Inc. and Dow Chemical Co. to expand sales. Manufacturing may also be restrained by weaker consumer spending in the face of unemployment exceeding 8 percent and the looming fiscal U.S. cliff of tax and government spending changes.
“Manufacturing has run out of steam in the face of global economic headwinds and domestic policy uncertainty,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “Slower growth in exports and business capital spending will keep growth subdued.”
Hurricane Isaac limited output in the Gulf Coast region at the end of August, reducing the nation’s industrial production by an estimated 0.3 percentage point, the Fed said today.
Estimates of the economists surveyed by Bloomberg ranged from a drop of 1.0 percent to an increase of 0.7 percent. The prior month was previously reported as a gain of 0.6 percent. Manufacturing accounts for about 12 percent of the economy.
Capacity utilization, which measures the amount of a plant that is in use, fell to 78.2 percent, the lowest since November.
Utility output plunged 3.6 percent, after a 1.3 percent gain the prior month. The figures may reflect some easing after the surge in July, which was the hottest month in the lower 48 states in records going back to 1895, according to the National Oceanic and Atmospheric Administration.
Mining production, which includes oil drilling, decreased 1.8 percent.
The output of motor vehicles and parts fell 4 percent, the most in more than a year, after increasing 2.7 percent the month earlier, today’s report showed. Excluding autos and parts, manufacturing dropped 0.4 percent after a 0.2 percent gain in July.