August US industrial output flat, missing expectations

• The previous month's reading was +0.2%.

The following data covers US industrial production and capacity utilization for August.

• Industrial production month over month was unchanged at 0.0%, below the forecast of +0.3%. The prior month was +0.2%.
• Manufacturing output fell 0.3% month over month, compared to expectations for a +0.3% gain. The prior month saw a +0.2% rise.
• Capacity utilization came in at 76.3%, just under the 76.4% estimate and matching the prior month's level.

Industrial activity in the US turned out softer than anticipated in August. Total output was flat, missing the expected 0.3% increase, while factory production dropped 0.3% against a predicted 0.3% advance.

The manufacturing data was the weakest component of the release. The shortfall of 0.6 percentage points indicates that factory activity slowed during the month. Capacity utilization remained at 76.3%, slightly below the estimate and unchanged compared with July.

A quick assessment: The weaker production numbers point to some cooling in the industrial sector of the US economy. This would normally exert mild downward pressure on Treasury yields and the dollar, though the Federal Reserve is likely to keep its focus on inflation and employment for its next policy decision. One weak industrial report will not change the Fed's outlook on its own, but it contributes to a softer growth signal after this week's rate increase.

This report tracks the monthly change in output from US factories, mines, and utilities. Capacity utilization indicates the proportion of the economy's industrial capacity that is in use. Traders watch the data for signs of strengthening or weakening economic activity and for inflation risks when plants run close to full capacity.

A detailed breakdown of the Federal Reserve's August industrial production numbers reveals clear differences across market categories, industry groups, and capacity use.

Market Groups Breakdown

• Consumer goods output rose 0.1%, a modest increase supported by higher nondurable goods production that offset a decline in durable consumer goods.
• Business and defense supplies saw notable weakness across investment categories. Business equipment dropped 0.5%, and defense and space equipment fell 1.2%.
• Supplies and materials: Construction supplies fell sharply by 0.7%, whereas business supplies edged up 0.1%. Total materials output increased 0.2%, buoyed by a 0.7% jump in energy materials.

Industry Groups Performance

• Manufacturing output declined 0.3%, ending a seven-month expansion run. The weakness was centered in durable goods manufacturing, which fell 0.5% with widespread declines, while nondurable manufacturing was unchanged at 0.0%. Publishing and logging offered a small gain of 1.0%.
• Mining output increased 0.1%, and utilities output jumped 1.8%, spurred primarily by higher demand for electric utilities that outweighed a decrease in natural gas utilities.

Capacity Utilization Rates

• Manufacturing capacity utilization fell 0.3 percentage points to 75.7%, leaving factory operating rates 2.5 percentage points below the long-term average from 1972 to 2025.
• Mining capacity utilization inched up 0.1 percentage point to 86.3%, which is 1.1 percentage points above its historical norm.
• Utilities capacity utilization rose 1.1 percentage points to 71.3%, but operating rates remain substantially below long-term historical levels.

In contrast, the Philly Fed index released yesterday showed stronger readings.

The regional survey data from the Philadelphia Fed Manufacturing Index, also released yesterday, painted a different picture of factory activity compared with today's hard data.

• The Philly Fed index came in at 37.8, above the forecast of 31.3, indicating ongoing strong expansion among Mid-Atlantic manufacturers. Although it dipped from August's multi-year peak of 47.4, the level is still firmly in positive territory.
• Industrial production data showed manufacturing output falling 0.3% and overall production flat at 0.0% in August, suggesting a stagnant to contracting factory sector nationwide.

Key takeaways from the differences:

• Survey data versus hard data: Business surveys capture executive sentiment and directional optimism, while industrial production tracks actual physical output. Strong sentiment in regional surveys does not always quickly translate into concrete production gains.
• Regional differences: Manufacturers in the Mid-Atlantic region are outperforming the national trend, which is being held back by broader geographic weaknesses, supply imbalances, or softer demand in other areas.