Factory production rebounds

U.S. factory output increased in August at a solid clip, reversing a sharp drop in July, as production of metals, machinery and chemicals all rose.

What happened

The Federal Reserve said Tuesday that manufacturing production climbed 0.5% last month, after a 0.4% drop in July.

Despite the improvement, manufacturers will likely continue to struggle. Factories have been hit by the U.S.-China trade dispute, which has raised their costs and curtailed their exports. Manufacturing output fell in the first two quarters of this year, the first time that’s happened since 2016. In the past 12 months, factory output has dropped 0.4%.

What might be next

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the improvement last month was mostly a blip and the trade dispute will continue to drag down U.S. factories.

“Manufacturing is in recession, with no relief in sight,” he said in a note to clients.

Industrial production, which includes manufacturing, mining and utilities, rose 0.6% in August. Mining output jumped 1.4%, partly because oil and gas drilling rebounded after Hurricane Barry shut down production in July. Utility output rose 0.6%.

Auto production dropped 1% in August, the most since April, the Fed report found. Clothing and paper production also dropped. Output of computers, aircraft and furniture rose.

Manufacturing in decline

Other measures suggest that U.S. manufacturing production will keep declining. A survey of factory purchasing managers released earlier this month showed that manufacturing activity shrank in August for the first time in three years. New orders fell sharply, the survey found, a sign that output may fall further in the coming months.

Manufacturers have also slowed their hiring, adding just 3,000 jobs in August, down from an average of 22,000 a month last year.

ASSOCIATED PRESS Despite the improvement, manufacturers will likely continue to struggle.