Manufacturing Weakness Deepens With Bigger-Than-Expected Decline in Industrial Output

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Federal Reserve data shows a 0.3 percent decline in industrial output.

U.S. industrial production fell more sharply than expected in September, signaling continuing weakness in the nationโ€™s factory activity.

Data from the Federal Reserve, released on Oct. 17, showed a 0.3 percent decline in industrial output, following a downwardly revised 0.3 percent gain in August. Analysts had predicted a smaller drop of 0.2 percent for the month.

According to the Fed, the larger-than-expected decline was due in part to disruptions from Hurricanes Helene and Milton, along with the ongoing Boeing machinistsโ€™ strike. The aerospace sector, in particular, took a significant hit, with production of aerospace and miscellaneous transportation equipment falling by 8.3 percent, dragging down the overall index.

The broader picture also looks bleak, with industrial output for the third quarter down 0.6 percent. This aligns with other recent indicators pointing to ongoing challenges in the U.S. manufacturing sector.

The latest S&P Global U.S. Manufacturing PMI, a key survey-based measure, showed the sharpest contraction in factory activity in over a year for September. Factory output and new orders dropped sharply, driven by weakened demand.

โ€œThe September PMI survey brings a whole slew of disappointing economic indicators regarding the health of the U.S. economy,โ€ Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. โ€œFactories reported the largest monthly drop in production in 15 months in response to a slump in new orders, in turn driving further reductions in employment and input buying as producers scaled back operating capacity.โ€

The deepening decline in U.S. manufacturing, highlighted by the S&P Global report, was reinforced by the Fedโ€™s latest industrial production data. It showed a 0.4 percent month-over-month fall in manufacturing output for September and a 0.5 percent drop compared with the previous year.

Similarly, the Institute for Supply Management (ISM) reported a contraction in U.S. manufacturing for September, marking the sixth straight monthly decline and the 22nd contraction in the past 23 months. Timothy Fiore, chair of the ISMโ€™s Manufacturing Business Committee, noted that demand remains sluggish, with companies hesitant to invest in capital and inventory.

Byย Tom Ozimek

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