US industrial production may have slipped in August, held back by strong dollar

EnergyAssociated Press

The Federal Reserve releases its August industrial production report Tuesday at 9:15 a.m. Eastern.

SMALL DROP: Economists forecast that industrial production slipped 0.2 percent last month, after rising 0.6 percent in July, according to a survey by FactSet.

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Manufacturing output, the biggest component of industrial production, jumped 0.8 percent in July, the biggest increase since last November. A big jump in auto production drove much of the increase. Auto output likely fell back last month, dragging down production.

Mining production, which includes oil and gas wells, rose just 0.2 percent in July, while utility output, which is heavily affected by weather, fell 1 percent.

MANUFACTURING STUMBLES: Factories have had a tough year, with a strong U.S. dollar and weak overseas growth cutting into U.S. exports. The dollar has risen about 14 percent in value against other currencies in the past year. That makes U.S. products more expensive and therefore less attractive overseas.

China's economy is also faltering after decades of breakneck growth. It has been a critical source of demand for American-made industrial machinery, such as mining trucks, construction equipment, and agricultural machines. Its slowdown has hit sales and profits for companies like Caterpillar and United Technologies.

Falling oil prices have also dragged down factory output. Crude oil prices, which were around $60 per barrel in the spring, have fallen to about $44. The decline has forced energy firms to curtail drilling, eliminating much of the need for new pipelines and equipment that had boosted factory orders in previous years.

Strong auto sales, however, have provided helped offset the overseas weakness. Auto production soared 10.6 percent in July, though some of that gain may have reflected difficulties in seasonally adjusting the data. Many economists expect auto output will fall back in August after such a big gain.

And there are also signs that some companies are stepping up their investment in machinery and equipment, which is boosting demand for factory goods. Orders received by U.S. factories rose 0.4 percent in July, after a 2.2 percent gain in June.

A key category that tracks business investment plans climbed 2.1 percent in July, the strongest gain in 13 months.