WASHINGTON -- U.S. manufacturing output fell for the first time in seven months in August, but the underlying trend remained consistent with steadily rising factory activity.
That was confirmed by other data Monday showing factory activity in New York state jumped to its highest level in nearly five years in September.
"The weakness in factory output in August is likely to be transitory. We continue to expect underlying U.S. economic growth momentum to continue shifting higher this quarter," said Millan Mulraine, deputy chief economist at TD Securities in New York.
U.S. factory production dropped 0.4 percent last month as motor vehicle production declined sharply after surging in July, the Federal Reserve said. July's factory output gain was revised lower to show a 0.7 percent increase rather than the previously reported 1 percent rise.
Economists polled by Reuters had forecast manufacturing output rising 0.3 percent in August.
Excluding automobiles, manufacturing production gained 0.1 percent in August. So far in the third quarter, factory output is running at a 4.6 percent annual pace.
Motor vehicle output declined 7.6 percent last month after a 9.3 percent jump in July.
In a separate report, the New York Fed said its Empire State general business conditions index soared to 27.54 this month, the highest reading since October 2009, from 14.69 in August.
A reading above zero indicates expansion in the region's factories. A gauge of new orders rose last month and inventories continued to shrink, but at a slower pace.
Mining output increased 0.5 percent in August, while utilities production rebounded 1 percent.
That helped to cushion the drag from manufacturing, leaving overall industrial production falling only 0.1 percent in August. July's increase in industrial output was revised down to 0.2 percent from 0.4 percent.
The amount of manufacturing capacity in use fell to 77.2 percent last month from 77.6 percent in July.
Overall industrial capacity use declined to 78.8 percent from 79.1 percent in July. It was 1.3 percentage points below its long-run average.
Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to run before it becomes inflationary.
-With additional reporting by Daniel Burns in New York.
9 Numbers That'll Tell You How the Economy's Really Doing
Industrial Production Slips on Reduced Vehicle Output
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.