Industrial production increased in August, with the aggregate gain being in line with expectations. Specifically, the U.S. Commerce Department reported that industrial output gained 0.4% last month, as automakers and other manufacturers ramped up production. This sign of an improving industrial base, was in line with expectations.
As noted, industrial production gained 0.4% last month, while the rate of capacity utilization added 0.2% in August, to a rate of 77.8%. That increase, too, was in line with expectations.
Meanwhile, manufacturing, the biggest component of industrial production, advanced by 0.7% in August. Expectations had been for just a 0.4% gain. In July, that metric had shown a drop of 0.4%, while the composite index had been unchanged. As to the other components, utility output dropped by 1.5%, presumably because August was a cooler than normal month in many locales across the country, while mining activity rose by a modest 0.3%.
This is a closely watched report by the Federal Reserve, and that is critical, as the central bank is preparing for its two-day FOMC meeting to begin tomorrow morning. Expectations are that the Fed will use this forum to announce a slight slowdown in its popular program of bond buying. This report's results are not expected to unduly influence the Fed, but the strength shown in manufacturing could well nudge the lead bank a bit closer to moving to a nominally less accommodative monetary course. All told, manufacturing accounts for less than one-fifth of total business activity in this country, but the sector is scrutinized as a reflection of the broader health of the domestic economy.
Moreover, the Institute for Supply Management had earlier this month said that the nation's manufacturing sector had expanded at its quickest pace in more than two years. Also, a report issued earlier this morning by the New York Fed had said that business conditions for Empire State had remained strong this past month.
Taking the report apart, in addition to nice gains by the auto component, other manufacturers reported that they were seeing strength. These include the makers of wood product, computers, electronics, electrical equipment, appliances, and furniture. On the whole therefore, this was a solid report, and somewhat better from an economic standpoint, than the 0.4% increase in the total index might suggest.At the time of this article's writing, the author did not have positions in any of the companies mentioned.