US industrial production hit by mining slump

The 0.2% m/m decline in industrial production in September was a much smaller fall than we were expecting, but it nonetheless illustrates the impact that the stronger dollar is having on manufacturing and the impact that the slump in energy prices is having on mining output.

As it turned out, manufacturing output fell by a very modest 0.1% m/m last month and the decline in August was revised to 0.1% m/m from 0.4% m/m. Based on the big drop in hours worked by manufacturing employees in September.

"We were braced for a fall in output of as much as 0.8% m/m. The longer-term picture is that manufacturing output has been basically unchanged since the start of this year and is up only 1.4% over the past 12 months. While the impact that the stronger dollar has on prices will fade soon, the negative effect on output is likely to persist for a lot longer. Accordingly, we wouldn't be surprised if manufacturing output trended sideways until the middle of next year, before finally beginning to rise again after that", says Capital Economics in a research note.

Mining output fell by 2.0% m/m in September and is down by 5.7% cumulatively over the past 12 months. The contraction was initially due to the slump in drilling activity, but in recent months actual oil & gas extraction has started to contract too.

Otherwise, utilities output increased by 1.3% m/m, with unseasonably warm temperatures boosting the demand for air-conditioning late in the summer. Overall, nowhere near as bad as feared, but still bad enough.