Industrial Output Tumbles 1.1% On Bad Weather, Decline in Autos

By JEFF BATER Wall Street Journal
September 15, 2008 9:23 a.m.

WASHINGTON — Production by U.S. industries plunged in August, falling double the rate expected as carmaking slumped and weather both mild and stormy struck.

Industrial production decreased 1.1%, following a downwardly revised 0.1% climb in August, the Federal Reserve said Monday. Previously, July output was seen rising 0.2%.

Capacity utilization decreased to 78.7% in August. July capacity use was 79.7%, revised down from an originally reported 79.9%. The 1972-2007 average is 81.0%.

Economists expected industrial production to drop 0.5%, with a capacity utilization rate of 79.4% for the month.

Over the 12 months ending in July, industrial production was 1.5% lower. Manufacturing production decreased 1.0% in August, after increasing 0.1% in July. Manufacturing capacity utilization decreased to 76.6% from 77.5%.

Manufacturing of motor vehicles and parts dived 11.9% last month compared with July. It increased 2.5% in July. For the year, auto production was down 20.7%. The weak economy is keeping consumers from making big purchases, and high gasoline prices have also hurt vehicle sales.

Excluding motor vehicles and parts, industrial production would have decreased 0.2% in August. Production ex-auto in July fell 0.4%.

U.S. utilities output plunged 3.2% in August and the sector’s capacity usage was 81.5%, down from 84.4% in July. Utilities fell so sharply because of unseasonably mild temperatures, the Fed said. But some bad weather — Hurricane Gustav — affected energy production.

“Precautionary shutdowns in the Gulf of Mexico in advance of Hurricane Gustav partly curtailed refinery activity, petrochemical production, and the extraction of crude oil and natural gas,” the Fed said in its report. “However, the estimated effect in August of disruptions due to the hurricane on total industrial production is estimated to have been less than 0.1 percentage point.”

Mining output fell 0.4% in August and mining capacity usage was 91.3%, down from 91.7%. Mining rose 1.1% in July. Machinery production rose by 0.3% in August after remaining flat in July. Business equipment decreased 0.6% in August.

Production of construction supplies fell 1.0% in August after rising 0.4% in July as the housing slump wears on.

Output at the nation’s technology firms was flat in August after rising 1.3% in July. Technology production has been giving overall output a big boost, having climbed 19.4% over the past year.

Write to Jeff Bater at jeff.bater@dowjones.com