Industrial production dropped for the first time in five months, falling 0.6 percent last month compared to August on a decline in manufacturing, the Federal Reserve reported Friday.
Analysts had been forecasting a 0.6 percent increase in September amid a continued recovery from the pandemic downturn, but a 0.3 percent drop in manufacturing — its first retreat since April — combined with another retreat in utilities sent total output into the red, the report said.
Compared to September of last year, industrial production is still down 7.3 percent despite four months of gains during the Covid-19 crisis.
“Although production has recovered more than half of its February to April decline, the September reading was still 7.1 percent below its pre-pandemic February level,” the Fed said, adding that manufacturing lagged by 6.4 percent.
Manufacturing of motor vehicles and parts fell 4.0 percent, only slightly less than the decline in August, which combined with a drop in computers and electronics overwhelmed increases in other sectors, according to the data.
Oren Klachkin of Oxford Economics said the drop in output was “one of the first real signs that the recovery is losing momentum under the weight of the ongoing health crisis and fading support from fiscal relief.”
Policymakers in Washington have been locked in talks for weeks over a new rescue package for the US economy to help businesses and workers, but officials say an agreement is unlikely before the November 3 presidential election.
Output recovered in the third quarter overall, increasing at an annual rate of 39.8 percent after a nearly 43 percent drop in the second quarter during the height of the pandemic, the report notes. Those figures calculate the full-year result if the three-month pace was continued for 12 months.
While mining, boosted by increasing oil and gas production, gained 1.7 percent in September compared to the prior month, utilities fell 5.6 percent. Oil and gas well drilling edged up following six consecutive months of declines.
And installed capacity in use last month slipped by a half point to 71.5 percent, while manufacturing dipped two-tenths of a percent, the report said.