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Industrial Production Rose in August

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09/14/2018 | 03:31pm CEST

By Sharon Nunn and Eric Morath

WASHINGTON--U.S. industrial output rose for the third month in a row in August, largely because of strong utility and motor-vehicle production.

Industrial production, a measure of factory, mining and utility output, grew a seasonally adjusted 0.4% in August from the prior month, the Federal Reserve said Friday. Economists surveyed by The Wall Street Journal had expected a 0.3% gain for August. Industrial output has risen steadily throughout the summer months.

Robust 1.2% production growth in the utilities sector helped push last month's overall output gain, with electricity production increasing at a solid pace from pullback seen earlier in the summer months.

Meanwhile, output at factories increased a modest 0.2%, but largely because of motor vehicle and parts production. If ones removes that from the measure, manufacturing output was unchanged in August. Mining production continued to increase steadily at 0.7%. Output in the category has grown each month since January.

In the longer term, industrial production rose 4.9% in August from the prior year. That is running ahead of broader economic output growth this year.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, increased by 0.2 percentage point to 78.1% in August. Economists had expected 78.2%.

Overall industrial production in July was revised up to a 0.4% gain from a pervious estimate of up 0.1%. Capacity utilization for the month was revised down to 77.9% from a first estimate of 78.1%

Manufacturing production has been rising since mid-2016, when rising oil prices helped reverse a hit to U.S. energy production. The manufacturing sector was hit hard by the 2007-09 recession and later by a big drop in oil prices, which hurt energy production. More broadly, it has been buffeted by years of competition from low-cost countries such as China.

"While there have been increased signs of slowing external growth, strong domestic demand will likely remain supportive for industrial activity expansion," Lewis Alexander, chief U.S. economist at Nomura, said prior to the report.

The Federal Reserve's latest report on industrial production and capacity utilization can be accessed at: https://www.federalreserve.gov/releases/g17/Current/

Write to Sharon Nunn at sharon.nunn@wsj.com and Eric Morath at eric.morath@wsj.com.

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