Factory output up in September

Production climbs 2.8% in 3rd-quarter expansion, Fed says

Workers assemble a redesigned Altima sedan in September at the Nissan plant in Canton, Miss. Autos led the 0.2 percent rise in the production of consumer goods in September.
Workers assemble a redesigned Altima sedan in September at the Nissan plant in Canton, Miss. Autos led the 0.2 percent rise in the production of consumer goods in September.

U.S. factory production expanded in September for a fourth-consecutive month on broad-based demand as the sector accelerated in the third quarter, Federal Reserve data showed Tuesday.

The report showed most categories are supporting industrial output with gains across consumer goods, business equipment and industrial materials.

Factory output increased 2.8 percent at an annual rate in the third quarter, up from a 2.3 percent pace in the previous three-month period, the Fed said in the report. That's in sync with the Institute for Supply Management's factory index, which remains near the highest level of this expansion.

Over the past year, industrial production rose 5.1 percent.

The increase was slightly higher than economists had expected and offered more evidence that the U.S. economy is in good health. Overall economic growth reached 4.2 percent from April through June, fastest in nearly four years. The U.S. unemployment rate has dropped to 3.7 percent, lowest since 1969.

Led by autos and wood products, production of consumer goods grew 0.2 percent, slowest growth since a drop in May. Manufacturers are contending with a strengthening dollar that makes their products more expensive in foreign markets.

Output of business equipment increased 0.8 percent and machinery production rose 0.9 percent.

Auto production increased 1.7 percent after surging 4.3 percent in August. Construction-goods output fell 0.6 percent after rising 0.3 percent.

Mining production rose 0.5 percent, the eighth-straight increase. Mining output, which includes oil and gas producers, has surged 24 percent since 2016 as oil prices rebounded from a slump.

Utility output was flat last month -- after surging 1.1 percent in August -- but is up 5.4 percent since September 2017.

Overall output growth in September was held down slightly by Hurricane Florence, with an estimated impact of less than 0.1 percentage point, the Fed said. Florence, which made landfall Sept. 14, caused widespread devastation and power failures in North Carolina and South Carolina.

Economists expect continued data volatility because of Hurricane Michael, which shut down offshore oil production in parts of the Gulf of Mexico and led to power failures in the Florida panhandle this month.

Excluding motor vehicles, manufacturing production rebounded 0.1 percent after a 0.1 percent decrease the previous month. Industry reports show vehicle sales grew in September at the fastest pace since March.

While strong consumer demand and lower corporate taxes signal manufacturing will keep expanding, the sector faces head winds including rising costs for materials and supply constraints linked to tariffs and trade tensions with China.

The Fed's monthly data are volatile and often get revised. Manufacturing, which makes up 75 percent of total industrial production, accounts for about 12 percent of the U.S. economy.

Information for this article was contributed by Shobhana Chandra of Bloomberg News and by Paul Wiseman of The Associated Press.

Business on 10/17/2018

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