U.S. industrial production continues to drop

The Federal Reserve recently announced another month of decreased U.S. industrial production. September numbers show a 0.2 percent decline, according to Reuters. August was no better, with a dip of 0.1 percent in production numbers.

Overall manufacturing output dropped 0.1 percent and mining production saw a full 2 percent reduction. However, the largest decline was in oil and gas well drilling, which dropped 4 percent, despite increased production in July and August, said the source.

The only hope came from the automobile industry. While overall manufacturing did see a drop, the production of motor vehicles and their parts saw a 0.2 percent rise.

The global economy and the strengthening dollar
According to Supply Chain 24/7, this dip in production numbers is no new occurrence. Industrial production in the U.S. has been on the decline since December of last year. While the numbers stayed relatively steady from December through April 2015, an unexpected dip in May production signaled a negative shift.

Reuters cited the dwindling global economy combined with a strong dollar as the core of the problem. Overall, the demand for goods manufactured in the U.S. has slowed due to these two factors and as a result industrial production has taken a hit.

The dramatic dip in oil prices is not helping the situation either. Reuters noted that capital investments in the energy sector have been undermined by these lower prices.

What does it mean?
The commerce department recently reported a smaller than expected rise in retail sales. These retail numbers combined with those of the U.S. industrial production suggest an overall slowdown of growth for the U.S. economy, explained Reuters.

Supply Chain 24/7 contributor Greg Robb believes these numbers pose a bigger problem. Robb calls this extended period of decreased growth a U.S. technical recession.

With the production rates seeing a fairly consistent decline since May, Robb makes a fair point. However, Supply Chain Digest suggests that while the Federal Reserve numbers aren't inaccurate, they have previously painted a much bleaker version of reality.

According to the US Purchasing Managers Index released by the Institute for Supply Chain Management in July 2015, U.S. industrial production is still growing just at a slower rate than in the past.

Neither Robb nor the SCDigest Editorial Staff are wrong here, they are merely viewing the decrease in production numbers through different lenses.

However, for supply management heads and distributors everywhere this means that while there may be a slight decrease in demand, there is no need to panic.

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