WASHINGTON -- U.S. industrial production fell in August by the largest amount in more than three years as factories produced fewer cars and other manufactured goods and Hurricane Isaac triggered shutdowns along the Gulf Coast.
Industrial production dropped 1.2 percent last month compared to July, the Federal Reserve said Friday. It was the biggest setback since a 1.7 percent decline in March 2009 when the country was in recession.
Manufacturing output, the most important component of industrial production, fell 0.7 percent, led by a 4 percent drop in output at auto plants.
Manufacturing helped lift the country out of the Great Recession, but it slowed in the spring as consumers cut back on spending, businesses invested less in machinery and demand for U.S. exports was hurt by a global weakness.
U.S. factory activity shrank for a third straight month in August, according to the Institute for Supply Management's closely watched survey of manufacturing conditions.
Paul Ashworth, chief U.S. economist at Capital Economics, said that he was concerned that the 0.7 percent drop in manufacturing output was "the start of a much weaker trend, as the global economic slowdown begins to have a more marked impact." He predicted further declines in industrial output in coming months.
In August, employers added just 96,000 jobs. That's down from 141,000 in July and far below the average 226,000 a month created in the January-March quarter.
Growth slowed in the April-June quarter to an annual rate of just 1.7 percent, down from 2 percent in the January- March quarter and 4.1 percent in the final three months of last year.
The weakness in manufacturing in August was widespread. Production fell at factories making machinery, computers, airplanes and furniture.
Even with the August decline, output at manufacturing plants is still 20.7 percent above the recession low hit in June 2009.
Output in mining, which also includes oil and gas production, fell 1.8 percent in August compared to July with much of that weakness attributed to precautionary shutdowns of oil and gas rigs in the Gulf of Mexico in advance of Hurricane Isaac in late August.
Output at the nation's utilities dropped 3.6 percent in August after posting a 1.3 percent increase in July.