The Federal Reserve reported Friday that industrial production suffered its first decline since a 12.7% drop in April during the spring lockdowns of businesses that paralyzed the economy. The key category that reflects manufacturing output fell 0.3%. At the same time, mining output, which includes oil and gas exploration, fell 5.6%. Production at utilities rose 1.7%.
Last month's reading on industrial production followed four straight increases that began in May after sharp declines in March and April. Industrial production has recovered more than half of its spring declines but remains 7.1% below its pre-pandemic level in February.
“Industrial output came in well below expectations, 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,” Oxford Economics said in a research note.
Production of motor vehicles and parts fell for a second straight month, dropping 4% after a 4.3% decline in August which had followed big increases after auto plants re-opened. The weaker-than-expected September showing may signal a slowdown in manufacturing, which had been a rare bright spot in the economy, that could hinder overall growth in coming months.
“Rising virus outbreaks that can interrupt activity remain a threat going forward,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. In September, industry operated at 71.5% of capacity, down from a reading of 77.4% of capacity a year ago.