US Manufacturing Output Rises Solidly in September

Production at U.S. factories increased more than expected in September despite strikes in the automobile industry curbing motor vehicle output, further evidence that the economy exited the third quarter with momentum.

Manufacturing output rose 0.4% last month, the Federal Reserve said on Tuesday. Data for August was revised lower to show production at factories dipping 0.1% instead of nudging up 0.1% as previously reported. Economists polled by Reuters had forecast factory output would tick up 0.1%.

Production dropped 0.8% on a year-on-year basis in September. It was unchanged in the third quarter. Durable goods manufacturing output rose at a 2.3% annualized rate, which was offset by a 2.4% pace of decline in nondurable manufacturing.

Motor vehicle and parts output rose 0.3% last month after declining 4.1% in August.

The United Auto Workers union embarked on limited strikes at factories owned by General Motors, Ford, and Chrysler parent Stellantis in mid-September. The industrial action has since broadened out, shutting down Ford's truck plant in Kentucky last week.

Despite last month's strong showing, manufacturing remains constrained by slowing demand for goods because of higher interest rates. Since March 2022, the Federal Reserve has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

Manufacturing accounts for 11.1% of the economy. But the worst for the sector is likely over, with the Institute for Supply Management's measure of national factory activity rising to a 10-month high in September.

Last month, there were solid increases in the production of wood, primary metals, plastics and rubber products. But output of apparel and leather as well as printing and support goods declines.

Mining output rose 0.4% after gaining 0.2% in August. Utilities production fell 0.3% after increasing 0.7% in the prior month. Overall industrial production rose 0.3% in September after being unchanged in August.

Industrial output increased at a 2.5% rate in the third quarter. That followed a 0.7% growth pace in the second quarter.

Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, rose 0.2 percentage point to 79.7% in September. It is now equal to its 1972–2022 average. The operating rate for the manufacturing sector nudged up to 77.8% from 77.7% in the prior month and is 0.4 percentage point below its long-run average.

Written by: Lucia Mutikani; Editing by Paul Simao, for Reuters.