U.S. industrial output continued to grow through September, posting the first quarterly gain since early 2008 and the largest single-quarter gain since Q1 2005, improving hopes that the current production upswing may be a permanent one.

Combined output from United States factories, mines and utilities increased for the third consecutive month in September, new reports show, reflecting the trend presented in the second straight month of growth in the manufacturing sector. The continued upswing is a promising sign for the industrial sector, indicating that production has reached a steady level of growth despite lingering instability in some segments of the economy.

According to the U.S. Federal Reserve’s latest monthly industrial production report, released on Friday, the nation’s industrial production rose by 0.7 percent in September. Following 1.2 percent gains in both July and August, this means that third-quarter output as a whole rose at an annual rate of 5.2 percent, the first quarterly increase since Q1 2008 and the largest single-quarter gain since Q1 2005.

“With manufacturing posting three consecutive strong monthly gains in production, we see early signs of recovery from the deepest drop in production in the post-World War II era,” David Huether, chief economist for the National Association of Manufacturers (NAM), said in a response to the findings. “While half of the September manufacturing production gain was concentrated in the motor vehicle sector, a majority of the 19 major industries posted production gains for all three months in the third quarter.”

According to the Fed report, manufacturing production rose by 0.9 percent (0.5 percent when excluding motor vehicles and parts) in September, bringing quarterly output to an annual rate of 7.1 percent growth. Mining output expanded 0.7 percent, while utilities contracted by 0.7 percent. Capacity utilization rose to 70.4 percent, up from 69.9 percent in August, but still 0.6 percent below its level from the same period last year. Total industrial production was also 6.1 percent lower than in September 2008.

“U.S. manufacturers posted solid gains in September, capping a strong third quarter. Gains were led by primary metals, autos, aerospace and chemicals,” Thomas J. Duesterberg, president and CEO of the Manufacturers Alliance/MAPI, said in an analysis of the report. “The inventory cycle has further to run, and this should sustain growth in the fourth quarter. But capacity utilization remains well below historical levels, and final demand for finished goods and capital equipment remains subdued.”

Despite struggling demand for certain products, the overall gain in September production exceeded many expectations. Most economists had forecast a gain of 0.2 percent, Agence France-Presse reports, while a poll conducted by MarketWatch predicted an average gain of 0.4 percent for the month.

Another promising indicator came from the Federal Reserve Bank of New York’s Empire State Manufacturing Survey last week, which showed that the business conditions index for New York manufacturers rose by 16 points in October to reach 34.6, its highest level in five years. More than half the survey respondents reported that business activity had improved for manufacturers, while 17 percent said it had worsened.

Data from the Manufacturers Alliance/MAPI’s quarterly Survey on the Business Outlook — September 2009, released last week, indicated that industrial business conditions were improving nationwide. The survey’s composite index for manufacturing activity rose to 38 in September, reaching its highest level in a year.

The quarterly orders index, which compares orders from Q3 2009 against Q3 2008, rose to 11 percent from 6 percent in the previous month’s survey. The annual orders index reached 66 percent, indicating that orders were expected to grow in 2010.

However, increased production and an improved outlook alone do not constitute economic stability, and efforts for stimulating industrial business are still being considered. Ron Bloom, the U.S. senior counselor for manufacturing policy (aka the president’s manufacturing czar), last week said that there are likely to be new initiatives geared to boost the industrial workforce in the coming months. (Source: Detroit News)

“Whether it will be through new legislative initiatives, etc., I assume there will be. But I am not going to wait for that,” Bloom said. “I think if we can do some of what we are doing better, I think we can make a genuine impact much more quickly.”

Earlier

U.S. Manufacturing Grows for Second Consecutive Month

Weekly Industry Crib Sheet: Car Czar Named to Manufacturing Post

Resources

Industrial Production and Capacity Utilization
U.S. Federal Reserve, Oct. 16, 2009

NAM Chief Economist Statement on Economic Indicators
National Association of Manufacturers, Oct. 16, 2009

MAPI Analysis on Industrial Production: ‘Solid Gains’ in September
Manufacturers Alliance/MAPI, Oct. 16, 2009

U.S. Industrial Production Advances in September
Agence France-Presse, Oct. 16, 2009

Industrial Output Grows the Most in Four Years
by Rex Nutting
MarketWatch, Oct. 16, 2009

Empire State Manufacturing Survey
Federal Reserve Bank of New York, Oct. 15, 2009

MAPI Survey on the Business Outlook: Improvement on Horizon for Industrial Sector
Manufacturers Alliance/MAPI, Oct. 15, 2009

Bloom Vows to Boost Manufacturing
by David Shepardson
The Detroit News, Oct. 14, 2009