Following a long period of expansion, U.S. industrial output decreased in September for the first time since the end of the recession, raising concerns over the long-term strength of the recovery in industrial production.

Industrial production in the United States decreased 0.2 percent in September, following 0.2 percent growth in August, according to the U.S. Federal Reserve‘s latest industrial sector report. This marks the first month that production has fallen since June 2009, the official end of the economic recession.

The slowdown in September has elevated concerns over the strength and pace of an industrial recovery in the U.S., as well as the growth prospects for the nation’s overall economy.

Released Monday, the Fed report indicates that much of last month’s production drop was due to declines in manufacturing, which accounts for the largest portion of industrial production. Manufacturing output fell 0.2 percent in September, following a 0.2 percent decrease in August. However, manufacturing production remained 5.4 percent above its prior-year level.

“Manufacturing has been one of the economy’s brighter spots over the past year. A revival in global trade, and the need for businesses around the world to rebuild inventories they cut sharply during the downturn, led manufacturers to ramp up production and hiring,” the Wall Street Journal explains. “But that process appears to have run its course, leaving the pace of economic growth largely dependent on the willingness of consumers to increase spending.”

Also in September, utilities output fell by 1.9 percent, following a 1.4 percent decrease in August. Mining production increased 0.7 percent after growing 1.6 percent in August.

At 93.2 percent of its 2007 average, total industrial production remained 5.4 percent above its year-ago level in September. For the third quarter as a whole, industrial production rose at an annual rate of 4.8 percent, down from the roughly 7 percent annual growth rate in the second and first quarters of the year.

The largest contributors to the decline in September output were: automotive products, which fell 1 percent; appliances, furniture and carpeting, which dropped 1.9 percent; and energy products, which also decreased 1.9 percent.

According to the Fed, consumer goods production declined 0.4 percent in September, while durable goods output fell 0.9 percent and non-durable goods decreased 0.2 percent. Business equipment production rose 0.1 percent for the month, climbing to 10.1 percent above its prior-year level. For the third quarter, the output of business equipment rose at an annual rate of 9.8 percent.

“The inventory swing that boosted production earlier in the recovery is giving way to more final demand-driven production schedules. Consumer-related manufactured goods led the decline in September, while weak computer sales and a sluggish aerospace sector dampened demand for capital goods,” Thomas Duesterberg, the president and CEO of the Manufacturers Alliance/MAPI, said in an analysis of the Fed report. “Clearly the U. S. industrial economy is slowing and is in need of stronger demand from consumers and from more robust global business investment in capital goods.”

Capacity utilization, a measure of how much the industrial sector’s production capabilities are being used, totaled 74.7 percent in September, down from 74.8 in August but still 4.2 percentage points higher than in September 2009.

Despite the recent production downturn, prospects for the future remain relatively positive in the manufacturing industry. According to MAPI’s latest quarterly Survey on the Business Outlook, the September composite index of business factors was at 77, marking the fourth consecutive quarter with the index above 50, which indicates overall growth.

“The forward-looking indexes, based on expectations for annual orders, investment, and R&D spending in the coming calendar year, were all at high levels,” Donald Norman, an economist and survey coordinator at MAPI, said in an announcement of the findings. “Especially encouraging is the continued improvement in the capacity utilization index. The pace of expansion may have slowed, but growth is expected to continue.”

Earlier: Industrial Production Inches Up in August

Resources

Industrial Production and Capacity Utilization
U.S. Federal Reserve, Oct. 18, 2010

Industrial Production Falls 0.2 Percent in Sept.
by Daniel Wagner
The Associated Press, Oct. 18, 2010

Industrial Output Dips
by Justin LaHart
The Wall Street Journal, Oct. 19, 2010

MAPI Analysis on Industrial Production: Modest Decline
by Thomas Duesterberg
The Manufacturers Alliance/MAPI, Oct. 18, 2010

MAPI Survey on the Business Outlook: Index at 77 Percent, Slight Decline but Sector Still Shows Strength
The Manufacturers Alliance/MAPI, Oct. 14, 2010