Industrial Sector Struggled in July -- Update

WASHINGTON -- U.S. industrial output fell in July, as the manufacturing sector continued to struggle with trade- related headwinds.

Industrial production, a measure of factory, mining and utility output, declined a seasonally adjusted 0.2% in July from the prior month, the Federal Reserve said Thursday.

That fell short of economists' expectations for a slight increase. June industrial production was revised to an increase of 0.2% from an earlier flat reading.

"Manufacturing is bearing the brunt of uncertainty around trade policy," said Stephen Stanley, chief economist Amherst Pierpont Securities.

Manufacturing output, the biggest component of industrial production, fell 0.4% in July from a month earlier. That helped tug down broader output across factories, mines and utilities last month.

The manufacturing industry's output accounts for about 75% of the nation's total industrial output. The Fed said manufacturing output has fallen more than 1.5% since December 2018.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, dropped by 0.3 percentage point to 77.5% in July. Economists had expected 77.8%.

Utility production rose 3.1% last month, reversing a sharp decline in June. Thursday's report showed output in the volatile mining sector fell 1.8% in July, which the Fed attributed a temporary decline in oil extraction in the Gulf of Mexico caused by Hurricane Barry. The mining index, which includes oil and natural gas extraction, was up 5.5% from a year earlier.

Weakness in manufacturing output aligns with a gloomy economic outlook, although the broader economy remains supported by a low unemployment rate, rising incomes and robust consumer confidence.

Thursday's report from the Federal Reserve contrasted with separate July data showing consumer shopping remained on a solid footing.

American shoppers continued to spend strongly at the start of the third quarter, providing a source of fuel for the economy at a time of heightened global uncertainty. Retail sales climbed a seasonally adjusted 0.7% in July from a month earlier, well above economists' expectations, the Commerce Department said Thursday.

Still, the factory sector is struggling with weak global growth, uncertainty over the trade situation and a strong dollar that makes American exports more expensive.

An index of factory activity produced by the Institute for Supply Management fell to 51.2 in July--its lowest reading in nearly three years--from 51.7 in June.

Though manufacturing accounts for a small share of gross domestic product, the sector is highly sensitive to shifts in global demand, making it a bellwether for the broader U.S. economy.

Write to Harriet Torry at

  (END) Dow Jones Newswires
  08-15-19 1026ET
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