US factory output slides in July on tumbling auto production

Production dropped 0.1%, pulled down by a 3.5% plunge in cars, trucks and auto parts output – the sector's third consecutive decline.

August 17, 2017   by CP Staff

WASHINGTON — A slump in the auto industry drove US factory output down in July and has kept it flat for months.

The Fed said factory production dropped 0.1% last month, pulled down by a 3.5% plunge in output of cars, trucks and auto parts. Auto production has dropped for three straight months and is down 5% over the past year. Auto sales, which have been strong in recent years, skidded 7% in July.

The drop in automotive production was partially offset in July by a 0.2% rise in other manufacturing output.

Overall industrial production _ which adds output by mines and utilities – rose 0.2%, the Fed said. Mining output rose 0.5%, and utility production rose 1.6%.


American manufacturers had bounced back from a slump in late 2015 and early 2016 caused by cutbacks in the energy industry and a strong dollar, which makes US goods costlier in foreign markets. But the Fed says manufacturing output was little-changed from February through July.

Other recent reports on American manufacturing have looked stronger.

The Federal Reserve Bank of New York on Tuesday reported that factory activity in New York shot up to the highest level in nearly three years.

The Commerce Department reported earlier this month that orders at US factories surged in June on strong demand for civilian aircraft. The Institute for Supply Management reported that American factories expanded in July for the 11th straight month.

Factories have hired 66,000 workers since July 2016, biggest 12-month gain in nearly a year and a half.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the Fed’s report Aug. 16 is “is very hard to square” with other manufacturing indicators. He expects to see “a clear and substantial rebound in August” or an upward revision in the July figures.

“The manufacturing recovery continues, after the hit from collapsing oil sector capex in 2015/16, but progress is slow,” Shepherdson wrote in a research note.

The Fed inadvertently released the report on its website before the scheduled release time of 9:15 a.m. Eastern.

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