Manufacturing May Throw Wrench Into Fed’s Plans

Idle plants are deflation’s workplace.

The U.S. economy is on pretty good footing now. Gross domestic product is growing steadily, robust job gains have whittled the unemployment rate and even the housing market seems to have gotten past the doldrums. These are some of the reasons why the Federal Reserve, at its two-day policy meeting ending Thursday, may raise interest rates for the first time since 2006.

One area of the economy with plenty of room for improvement, however, is manufacturing. The Fed’s August report on industrial production, due Tuesday, should make that evident.

Economists estimate industrial production—the combined output of U.S. manufacturers, utilities and mines—fell a seasonally adjusted 0.2% last month from July. Much of that decline owes to seasonal quirks.

Many auto plants that typically close for retooling in July stayed open instead. So the August figures won’t show their typical pickup, and after getting run through the statistical factors the Fed uses to smooth out seasonal swings will register a decline.

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