One-Off Factors Weigh Down September Industrial Activity

Industrial activity was weak in September, buffeted by adverse weather, tough times in farm country, labor disruptions, and the continuing trade war. After posting a modest rebound in August, industrial production hit another rough spot in September and was down 0.16 percent from a year earlier. Manufacturing and consumer goods showed even sharper declines. But there were too many one-off factors in September to say definitively that recent weakness will continue through the remainder of the year. 

Beyond the underlying economic fundamentals, there were a number of additional headwinds to industrial activity in September. Two major weather events, the ongoing General Motors strike, and the lingering effects of a weak agricultural year and the trade war all disrupted economic activity last month weighing down industrial output. Tropical Storm Imelda flooded southeast Texas and Hurricane Dorian prompted storm preparations and caused disruptions in the Southeast despite ultimately veering east into the Atlantic. 

The green shoots of a freight recovery that we saw in August needed a more temperate September in order to really take root. Despite a soft September for retail sales, consumer spending has generally been strong. If consumers regain their footing moving toward the holiday season and continue to be in a spendy mood, we should see a more robust freight recovery start to take hold. But there were too many other cross-winds in September for a freight turnaround.

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