U.S. output slowing down
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October 17, 2000: 3:24 p.m. ET
Production up 0.2% in September, Fed says, and 2.8% for third quarter
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NEW YORK (CNNfn) - Industrial production in the United States edged up during September but, for the third quarter as a whole, expanded at the slowest quarterly rate in more than a year and a half -- more signs that manufacturing activity is beginning to slow.
Output rose 0.2 percent last month, the Federal Reserve said, reflecting increased production of autos and replacement tires for Ford Motor Co. (F: Research, Estimates) Explorer S/UVs. Analysts polled by Briefing.com had anticipated a 0.1 percent increase for the month. In August, production at the nation's factories, mines and utilities advanced at a revised 0.4 percent pace.
However, for the third quarter, production increased at an annual rate of just 2.8 percent, down sharply from the 8.2 percent gain registered in the second quarter, for the smallest advance since a 2 percent gain in the first quarter of 1999, the Fed said. Capacity utilization rang in at 82.2 percent, meaning factories are running at more than 80 percent of their potential capacity.
"We have been seeing some fairly consistent signs in recent months that the manufacturing sector is slowing," said Anthony Karydakis, a senior economist with Banc One Capital Markets in Chicago. "Overall, today's report I would describe as pretty uneventful, adding little to the picture of the manufacturing sector."
Dollar, oil hurting manufacturing
Indeed, higher interest rates, a buildup of inventories and weaker global demand have contributed to a slower pace of growth in manufacturing, which accounts for about one-fifth of the economy. And that has been showing up in other economic numbers that measure U.S. manufacturing activity.
The Federal Reserve left short-term rates unchanged at its policy meeting earlier this month, though cautioned that it is still concerned about inflation -- something that has it leaning more toward a future rate increase than cut. The fed funds target currently rests at 6.5 percent.
Fed Bank of Richmond President Alfred Broaddus provided his input regarding U.S. manufacturing Tuesday, indicating there was "no question" that the strong U.S. dollar was hurting U.S. manufacturers.
"There's no question ... that the strong dollar has damaged manufacturing activity in the U.S. economy. We can see this in a lot of the manufacturing data that we get," Broaddus said after a speech, in response to remarks from a manufacturer in the audience who expressed frustration that the strong U.S. currency had dampened exports.
Broaddus also said that rising oil prices were unlikely to damage the U.S. economy in the long run, as long as there was no "major supply disruption."
Auto output 'noticeably low'
The Fed said output of new cars and light trucks during the third quarter was "noticeably below" the second-quarter pace. During September, business equipment production -- which includes computers -- grew by 0.3 percent, the smallest increase for any month this year after a 0.6 percent rise in August, the Fed said.
Overall, manufacturing output rose 0.3 percent during September after rising 0.2 percent in August. Mining output fell 1 percent after showing no change a month earlier. And output at utilities rose 0.7 percent after advancing 3.6 percent.
Auto production increased 1.1 percent after rising 4.4 percent in August. Auto parts production rose 2.1 percent after falling 1.5 percent. Semiconductor output rose 3.8 percent in September after rising 3.1 percent in August, while Iron and steel output fell 0.2 percent after gaining 1 percent.
In other categories, consumer goods production rose 0.8 percent in September after rising 0.1 percent in August. Appliance production rose 6.2 percent after declining 1 percent a month earlier.
-- from staff and wire reports
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U.S. Federal Reserve
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