August 15, 2019 / 1:27 PM / a month ago

UPDATE 1-U.S. manufacturing output drops in July

(Adds detail and context)

By Pete Schroeder

WASHINGTON, Aug 15 (Reuters) - U.S. manufacturing output dropped in July, ending a run of two months of growth.

The Federal Reserve on Thursday said manufacturing production shrank 0.4% last month, a steeper drop than the 0.1% decline expected by analysts in a Reuters poll.

Overall industrial output was down 0.2% in July, after analysts had anticipated a 0.1% gain.

The data may add to concerns about the strength of the U.S. factory sector amid lingering concerns about a slowing global economy. The July decline was the largest since April.

Manufacturing output is down over 1.5% since December 2018, the Fed said.

In July, the decline in factory output was broadbased across a number of sectors, including wood products, machinery and nonmetallic mineral products, according to the Fed.

Mining output fell 1.8% in July, which the Fed attributed to a sharp but temporary decline in oil extraction in the Gulf of Mexico due to Hurricane Barry. Despite the decline, mining output is still up 5.5% over the last year.

Output for utilities was up 3.1% after falling a similar amount in June.

Capacity utilization for manufacturing, a measure of how fully firms are using their resources, dipped slightly to 75.4% in July.

Capacity utilization across all industries, including utilities and mining, was down slightly to 77.5%, and now stands 2.3 percentage points below its 1972-2018 average.

Officials at the Fed tend to look at capacity use measures as an indication of how much more the economy may be able to grow before inflation becomes a concern. (Reporting by Pete Schroeder Editing by Chizu Nomiyama)

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