Manufacturing output muddles along in August

Summary

Industrial production eked out a modest 0.1% gain in August, but downward revisions suggest output is lower than previously thought. Manufacturing activity has actually perked up recently, but with growth concentrated in a few industries and lingering uncertainty, we expect activity to remain constrained through year-end.

One step up and two steps back

Despite widespread expectation for a second monthly decline, industrial production increased 0.1% in August. In isolation, that headline print may sound encouraging, but taken in the context of a sharp downward revision that took July's decline from a small 0.1% to a more disconcerting 0.4%, this latest report puts overall output lower than where we thought we were in July.

Utilities output was the main source of weakness, having declined 2.0% last month after a 0.7% drop in July, and while mining production rose 0.9%, that gain wasn't enough to erase the July drop (chart). But it wasn't all bad. The largest industry group, manufacturing, eked out a 0.2% gain and the underlying trend has actually firmed a bit recently. The index has been above 100 the past three consecutive months and, on a three-month moving average basis, hasn't been this high in three years.

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