Industrial production increased 0.4 percent in August, the fourth consecutive monthly increase. The August gain was much smaller than those in June (6.1 percent) and July (3.5 percent). After falling 17 percent in March and April, industrial production has increased 11 percent since then. Still, it is 7.3 percent below its level in February, before the pandemic.

Manufacturing output rose 1.0 percent in August, a solid increase, but that was far below the average monthly increase of 5 percent in May, June, and July. Mining output fell 2.5 percent in August as Tropical Storm Marco and Hurricane Laura caused temporary shutdowns in oil and gas extraction along the Gulf Coast. Utilities output fell 0.4 percent over the month.

On a year-ago basis overall industrial production was down 7.7 percent in August. Manufacturing output was down 6.9 percent year-over-year. Mining production was down 17.9 percent in August from one year earlier; in addition to temporary disruptions from the weather, extremely low energy prices have led to big production cuts since early 2020. Utilities output was up 0.5 percent in August on a year-ago basis.

The capacity utilization rate was 71.4 percent in August, up from 71.1 percent in July and a trough of 64.1 percent in April. Still, the capacity utilization rate was 76.9 percent in February, before the pandemic. While a few industries are experiencing production bottlenecks, there are wide swathes of unused capacity throughout the economy, which will restrain inflation in the near term.

The industrial sector is recovering from the Viral Recession, but growth will be slower through the rest of 2020 and in 2021. There were big increases in output in the spring and early summer as factories reopened, but with demand throughout the US and global economies still down substantially from early 2020, it will be more difficult to eke out near-term gains.

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