WASHINGTON – US factory production increased in September, but lost considerable momentum in the third quarter amid headwinds from the Middle East conflict, which has snarled supply chains and raised energy prices.
Manufacturing output rebounded 0.3% last month following a revised 0.2% decline in August, the Federal Reserve said on Oct 16. The rise was in line with economists’ expectations. Factory production was previously estimated to have dropped 0.3% in August. Output advanced 1.1% on a year-on-year basis in September. It grew at a 0.7% annualised rate in the third quarter after accelerating at a 5.6% pace in the second quarter.
Manufacturing accounts for about 9.4% of the economy. While an artificial intelligence (AI) infrastructure build-out and businesses rebuilding inventories to meet robust domestic demand are supporting factory activity, higher energy prices, a trade war with Canada and rising borrowing costs pose downside risks to production.
Diesel prices have surged to a record high as the US-Israeli war with Iran drags on, and economists say the economy could soon feel the effects through higher prices for goods, including at the supermarket, which could weigh on demand.
Durable goods manufacturing production edged up 0.1%, lifted by gains in the output of primary metals, machinery, and electrical equipment, appliances and components. Production of motor vehicles and parts fell 3%. Durable goods manufacturing output increased at a 3.8% rate in the third quarter, partly boosted by a 28.4% surge in the production of semiconductors and related electronic components related to the AI spending boom.
Non-durable manufacturing production rose 0.4% over the month amid gains in printing and chemicals output. Non-durable manufacturing output, however, fell 1.6% last quarter.
Mining production rose 0.2% last month and grew at a 5% rate in the July-September quarter. Utilities jumped 3.5% amid demand for air-conditioning. Utilities output increased at a 14.8% pace in the third quarter.
Overall industrial production rose 0.7% last month after gaining 0.1% in August. Industrial output increased 2.2% year-on-year in September. It advanced at a 2.8% pace in the third quarter after growing at a 4.8% rate in the second quarter.
Capacity utilisation for the industrial sector, a measure of how fully firms are using their resources, rose to 76.9% last month from 76.4% in August. But it is 2.5 percentage points below its 1972-2025 average. The operating rate for the manufacturing sector edged up to 75.9% from 75.8% in August. However, it is 2.3 percentage points below its long-run average. REUTERS