Production at US factories increased more than expected in September despite strikes in the automobile industry curbing motor vehicle output, further evidence that the economy exited the third quarter with momentum.

Manufacturing output rose 0.4 per cent last month, the Federal Reserve said on Tuesday (Oct 17). Data for August was revised lower to show production at factories dipping 0.1 per cent instead of nudging up 0.1 per cent as previously reported. Economists polled by Reuters had forecast factory output would tick up 0.1 per cent.

Production dropped 0.8 per cent on a year-on-year basis in September. It was unchanged in the third quarter. Durable goods manufacturing output rose at a 2.3 per cent annualised rate, which was offset by a 2.4 per cent pace of decline in non-durable manufacturing.

Motor vehicle and parts output rose 0.3 per cent last month after declining 4.1 per cent in August.

The United Auto Workers (UAW) union embarked on limited strikes at factories owned by General Motors, Ford and Chrysler parent Stellantis in mid-September. The industrial action has since broadened out, shutting down Ford’s truck plant in Kentucky last week.

Despite last month’s strong showing, manufacturing remains constrained 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 per cent-5.50 per cent range.

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Manufacturing accounts for 11.1 per cent of the economy. But the worst for the sector is likely over, with the Institute for Supply Management’s measure of national factory activity rising to a 10-month high in September.

Last month, there were solid increases in the production of wood, primary metals, plastics and rubber products. But output of apparel and leather as well as printing and support goods declines.

Mining output rose 0.4 per cent after gaining 0.2 per cent in August. Utilities production fell 0.3 per cent after increasing 0.7 per cent in the prior month. Overall industrial production rose 0.3 per cent in September after being unchanged in August.

Industrial output increased at a 2.5 per cent rate in the third quarter. That followed a 0.7 per cent growth pace in the second quarter.

Capacity utilisation for the industrial sector, a measure of how fully firms are using their resources, rose 0.2 percentage point to 79.7 per cent in September. It is now equal to its 1972–2022 average.

The operating rate for the manufacturing sector nudged up to 77.8 per cent from 77.7 per cent in the prior month, and is 0.4 percentage point below its long-run average. REUTERS