Industrial production dropped 1.2 per cent in August compared to July, the Federal Reserve said Friday. It was the biggest setback since a 1.7 per cent decline in March 2009, when the country was in recession.
Manufacturing output, the most important component of industrial production, fell 0.7 per cent, led by a 4 per cent drop in output at auto plants.
Manufacturing helped lift the U.S. 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 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.
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 per cent, down from 2 per cent in the January-March quarter and 4.1 per cent 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 per cent above the recession low hit in June 2009.
Output in mining, which also includes oil and gas production, fell 1.8 per cent 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 per cent in August after posting a 1.3 per cent increase in July.