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US manufacturing production barely rises in August

FILE PHOTO: Polaris ATV and snowmobile assembly line at their manufacturing and assembly plant in Roseau

WASHINGTON (Reuters) - Production at U.S. factories barely rose in August as motor vehicle output dropped and activity could plunge in the months ahead after the United Auto Workers (UAW) union embarked on strikes at three factories on Friday.

Manufacturing output edged up 0.1% last month, the Federal Reserve said on Friday. Data for July was revised slightly lower to show production at factories rebounding 0.4% instead of 0.5% as previously reported. Economists polled by Reuters had forecast factory output gaining 0.1%.

Production was down 0.6% on a year-on-year basis in August.

Motor vehicle and parts output decreased 5.0% last month after accelerating 5.1% in July, when it benefited from difficulties adjusting the data for seasonal fluctuations related to annual plant shutdowns for retooling.

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The UAW union launched simultaneous strikes at three factories owned by General Motors, Ford and Chrysler parent Stellantis on Friday, which could undercut manufacturing activity.

Manufacturing, which accounts for 11.1% of the economy, was already hobbled by slowing demand for goods because of higher interest rates. Since March 2022, the Federal Reserve has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

There are, however, tentative signs that manufacturing could be stabilizing. While the Institute for Supply Management's measure of national factory activity contracted for the 10th straight month in August, the pace slowed.

Excluding motor vehicles, factory output increased 0.6% last month after being unchanged in July. There were increases in the output of primary metals, machinery, aerospace and miscellaneous transportation equipment as well as furniture and related products. But production of wood products declined as did that of nonmetallic mineral products, fabricated metal products, and electrical equipment, appliances and components.

Mining output shot up 1.4% after falling 0.2% in July. Utilities production rose 0.9% after surging 4.4% in July as a heat-wave across many parts of the country boosted demand for air conditioning.

Overall industrial production rose 0.4% in August after accelerating 0.7% in July. Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, rose to 79.7% in August from 79.5% in July. It is in line with its 1972–2022 average.

The operating rate for the manufacturing sector was unchanged at 77.9% last month and is 0.3 percentage point below its long-run average.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)