Industrial production rose for the fourth consecutive month, but gains slowed from +6.1% in June and +3.5% in July to +0.4% in August, and output was down -7.7% compared to August 2019. Manufacturing was up +1.0% (-6.9% Y/Y), and, as with the headline numbers, slowed from +7.5% and +3.9% gains in June and July, respectively. Tropical Storm Marco and Hurricane Laura caused temporary sharp drops in oil and gas production, and pushed mining output down -2.5% (-17.9% Y/Y) after gains in the two previous months. Overall capacity utilization edged up from 71.1% in July to 71.4% in August, with manufacturing capacity utilization up +0.7% to 70.2%, while capacity utilization fell for mining (-1.7% to 74.5%) and utilities (-0.5% to 74.5%).

Retail sales were up +0.6% to $537.5 billion in August, gaining +2.6% for the year. Motor vehicle sales slowed from +6.3% in July to +0.2%, but remained up +4.5% for the year. Similarly, nonstore (e.g. online) retailers slowed from +23.4% growth in July to 0.0% in August, but remained +22.4% up for the year. Sales grew for restaurants (+4.7%), clothing stores (+2.9%), electronics stores (+0.8%), and gas stations (+0.4%) but each of these businesses were down compared to the previous year. Although sales were down -16.9% for the year for department stores, the larger general merchandise stores group was up +0.8%.

The Federal Reserve noted that disruptions from the coronavirus outbreak weighed heavily on the economy in the near term and posed a considerable risk to the medium term economic outlook. In light of the current economic situation, the FOMC said that it would keep the federal funds rate at 0 to 1/4 percent until it was confident the economy was on track to reach its “maximum employment and price stability goals”. Updated economic projections continued to maintain a 0 to 1/4 percent rate through 2023, but softened the 2020 GDP drop from June’s -6.5% to -3.7%, and lowered GDP growth projections to 4.0% in 2021, 3.0% in 2020, with longer run growth expected at 1.9%. Unemployment rate projections were similarly softened to 7.6% for 2020, 5.5% for 2021, and 4.6% for 2022.