Steep Drop in Output of Autos Lowers Production in Factories

Automakers in the U.S. cut back on production sharply in August, lowering the overall output in factories and highlighting a weak spot in the economy a day prior to a key meeting of the Federal Reserve.

Manufacturing production has fallen 0.5% the largest decline since January of 2014, said the Federal Reserve on Tuesday. The drop in output in the autos accounted for the largest part of the decline. Computer, furniture and airplane production also dropped.

Policymakers from the Fed will start a meeting of two days on Wednesday, to consider whether they will raise the short term rates of interest for just the first time in almost nine years.

Overseas growth that is slowing and a strong U.S. dollar, which are holding back output in factories could give them, cause to delay their rate hike.

Industrial production includes utilities and mining and overall dropped by 0.4% during August after a rise of 0.9% during July.

Auto production plummeted 6.4%, its sharpest fall in over three years, following an outsized increase in July of 10.6%.

Those types of swings partly reflect the difficulties in adjusting data and are likely only temporary.

U.S. carmakers in years past have closed temporarily some plants during July to retool them to prepare for new models.

Those factory shutdowns were either shorter or did not take place this year, which boosted production during July and lead to a drop off during August.

Auto sales have been strong and are on their way to topping 17 million in 2015 for just the first time since 2001.

Output in utilities was up 0.6% in August, likely due to Americans using more air conditioning. Production in mining, which includes gas and oil drilling, dropped 0.6%.

Factory output has remained flat for most of the year, largely due to global headwinds that cut into exports.

The U.S. dollar has increased about 14% in value versus the other currencies in the last year.

That makes products in the U.S. more expensive and less attractive to buyers overseas.