U.S. industrial production for SeptemberAmerica's economic recovery suffered a slight setback as industrial production unexpectedly dipped 0.2% in September, the U.S. Federal Reserve announced. It marked that index's first decline since June 2009. Capacity utilization dipped to 74.7% in September from August's revised 74.8%. Although September's utilization rate is 4.2 percentage points higher than a year ago, it's still 5.9 percentage points below the 1972-2009 average of 80.6%.

A Bloomberg survey had expected industrial production to rise 0.2% in September after a 0.2% gain in August. Industrial production rose 0.7% in July, 0.1% in June and 1.1% in May. That same survey also had expected the capacity utilization rate to remain unchanged at 74.8%.

September's industrial production decline was concentrated in utilities and manufacturing. Output at utilities -- which typically falls after the peak summer air-conditioning season passes -- plunged 1.9%, and manufacturing output declined 0.2%. Mining output rose 0.7%.

A Mild Disappointment

The industrial production and capacity utilization data are closely watched because even though manufacturing accounts for less than 20% of U.S. GDP, it accounts for a considerable portion of the nation's cyclical growth. Also, continual declines in production point to a softening economy. Rising output indicates the reverse. A low capacity utilization rate usually reflects softer demand, while high rate means strong demand, with the potential for increased inflation.

Separately, foreign demand for long-term U.S. securities totaled $128.7 billion in August, the latest month for which data are available, the U.S. Treasury Department announced today.

September's dip in industrial production is a mild disappointment. Manufacturing was expected to slow in the second quarter, as inventory rebuilding waned, but the 0.2% decline in September was larger than expected.

Still, one month is not enough to suggest a change in the generally positive long-term story of expansion in industrial production. If international demand remains strong -- and a weaker dollar should help American manufacturers like Boeing (BA), Caterpillar (CAT) and Alcoa (AA) with large foreign sales -- industrial production will more than likely resume its uptrend in the months ahead.

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Hey, what have we done to stop corporations from moving manufacturing and production facilities off shore? When consumer demand picks up, do you really think domestic facilities are going to ramp up production to meet that demand? Why, when it is more profitable for corporations to produce products off shore? I'm disappointed because our Congress has failed to properly regulate trade and has allowed our economy to lose much of its manufacturing and production base over the past 50 years...

October 19 2010 at 6:25 AM Report abuse rate up rate down Reply

So were those 0.2% of Obama/Biden's saved jobs or a 0.2% increase in new jobs at the unemployment office? For a truely muddled answer we need to ask Joe!

October 18 2010 at 1:39 PM Report abuse +2 rate up rate down Reply

I am not buying the statement of a mild disappointment. Not only did it slip it did not improve and if you consider the time of year with the up comming holiday season the numbers are sorry at best. Down play this if you want but I think the numbers will be revised to even a worse position. There may be a little light after the elections or not depends on what way they go it could get worse if things stay the same..

October 18 2010 at 10:56 AM Report abuse +3 rate up rate down Reply