Ahead of the Bell: US Industrial Production

Associated Press
US factory output drops in latest sign of weak growth

FILE - In this Aug. 20, 2015 file photo, United Auto Workers assemblyman Justin Johnson works on the Ford Mustang at the Flat Rock Assembly Plant in Flat Rock, Mich. Economists forecast that industrial production fell 0.3 percent in September, 2015 according to Econoday. That would be the second straight decline. Production jumped 0.9 percent in July. (AP Photo/Carlos Osorio)

WASHINGTON (AP) -- The Federal Reserve releases its September industrial production report Friday at 9:15 a.m. Eastern.

ANOTHER DROP: Economists forecast that industrial production fell 0.3 percent in September, according to Econoday. That would be the second straight decline. Production jumped 0.9 percent in July.

Manufacturing output, the biggest component of industrial production, fell 0.5 percent in August, the most in 19 months, because of a sharp fall in auto output.

Many analysts think that decline was mostly temporary, and auto sales have been healthy. As a result, car production will likely rebound in September.

Mining production, which includes oil and gas wells, fell 0.6 percent in August, while utility output, which is heavily affected by weather, rose 0.6 percent.

MANUFACTURING STUMBLES: Factories have had a tough year and there is little sign of improvement any time soon. A strong U.S. dollar and weak overseas growth have hammered U.S. exports. The dollar has risen about 13 percent in value against other currencies in the past 12 months. That makes U.S. products more expensive, and therefore less attractive, overseas.

Big overseas economies are grappling with slower or nonexistent growth, including China, Canada, Europe, and Brazil. Canada, the United States' largest trading partner, is in recession.

China and Brazil had been critical sources of demand for American-made industrial machinery, such as mining trucks, construction equipment, and agricultural machines. Their economic slowdowns have hit sales and profits for companies such as Caterpillar and United Technologies.

Falling oil prices have also dragged down factory output. Crude oil prices, which were around $60 per barrel in the spring, have fallen to about $49. The decline has forced energy firms to curtail drilling, eliminating much of the need for new pipelines and equipment that had boosted factory orders in previous years.

A private survey earlier this month found that U.S. manufacturing activity expanded last month at the slowest pace in two years. Measures of new orders and production also dropped sharply, suggesting weakness in manufacturing is likely to continue.