Following several months of steady growth, U.S. industrial production continues to increase despite some worrisome regional indicators and a slowdown in the broader economy.

Industrial production in the United States increased 0.2 percent in August, following a 0.9 percent rise in July, according to the U.S. Federal Reserve. This marked the fourth consecutive month of growth in industrial output, indicating a rebound from stagnant conditions earlier in the year, although results remain mixed in some industry segments.

Released last week, the Fed’s latest industrial sector report indicates that much of August’s production gain resulted from strong performance in manufacturing production, which constitutes the largest portion of overall industrial output. Manufacturing production increased 0.5 percent in August, following a 0.6 percent increase in July, largely due to a 2.6 percent rise in automotive output, which signaled that supply chain disruptions caused by the Japanese earthquake in March have eased.

“U.S. manufacturing has been one of the strongest sectors of the economy since the recession ended. But it slowed this year, in part because of the supply chain disruptions but also because consumers have grown more cautious,” the Associated Press explains. “Analysts said Hurricane Irene likely disrupted sales along much of the East Coast. But many consumers pulled back after a series of events that suggested the economy was at risk of another downturn.”

Last month’s manufacturing output remained 3.8 percent above the August 2010 level.

Mining production also increased in August, rising 1.2 percent after a 1.1 percent gain in July. Meanwhile, utilities output dropped 3 percent following 2.8 percent growth the previous month, as summer temperatures moderated.

At 94 percent of its 2007 average, total industrial production in August remained 3.4 percent above the prior-year level. Analysts were surprised at the change considering that several related economic indicators have recently underperformed.

“Economists had expected no change in industrial output in August given the weak unemployment report that showed a decline in factory jobs and a steady manufacturing workweek,” MarketWatch explains. “Economists said they were baffled by the relatively strong report that came on the same day that the Empire State index and the Philadelphia Fed’s manufacturing index remained in negative territory in September and were worse than expected.”

The largest production gains last month were in durable goods manufacturing, which increased 0.8 percent after 0.9 percent growth in July, while the overall durable manufacturing index climbed 7.7 percent above the prior-year level. However, decreases were reported in output for wood products, non-metallic mineral products and machinery. Non-durable manufacturing inched up 0.1 percent last month, led by a 1.1 percent increase in petroleum and coal products. Non-durable manufacturing stood 0.9 percent above its prior-year level.

Capacity utilization, a measure of how much of the industrial sector’s production capabilities are being used, rose to 77.4 percent in August, up from 77.3 in July and 1.9 percentage points above August 2010.

“There were also indications, however, that manufacturing is starting to feel the impact of a sharp U.S. economic slowdown and that the weakness demonstrated by regional and national leading indicators of manufacturing activity is slowly but surely showing itself in production data,” Cliff Waldman, an economist for the Manufacturers Alliance/MAPI, said in an analysis of the Fed report. “The most likely near-term course for the U.S. manufacturing sector is positive but significantly moderating growth. However, with the U.S. economy at a near standstill and world growth slowing quickly, a dimmer outlook for U.S. factories cannot be ruled out.”

Given sluggish growth in the general U.S. economy and the stagnant performance in some key regional centers, the challenge for manufacturing, and the industrial sector as a whole, will be to build and maintain production momentum through the rest of the year — a process that may be helped by international markets and domestic investment.

“Overseas demand and capital spending by American companies may keep assembly lines busy and boost manufacturing, which led the recovery from the recession,” Bloomberg News explains. “At the same time, unemployment above 9 percent and the lack of jobs is limiting sales, one reason factories may find it harder to gain speed.”

Earlier

Industrial Output Makes Largest Gain since December

Industrial Production up Slightly in June

Resources

Industrial Production and Capacity Utilization
U.S. Federal Reserve, Sept. 15, 2011

Factory Output Mostly Weak in August Outside Autos
by Daniel Wagner
The Associated Press, Sept. 15, 2011

Industrial Output up 0.2% in August
by Greg Robb
MarketWatch, Sept. 15, 2011

MAPI Analysis on Industrial Production: U.S. Manufacturing Sector at a Crossroads
by Cliff Waldman
Manufacturers Alliance/MAPI, Sept. 15, 2011

Industrial Production in U.S. Unexpectedly Rose in August for Fourth Month
by Shobhana Chandra
Bloomberg News, Sept. 15, 2011