US Factory Output Sees First Decline in Seven Months as Costs Rise

US factory production unexpectedly fell in August, marking the first decline in seven months. According to data released by the Federal Reserve on Friday, output dropped 0.3% following a 0.2% increase in July.

The decline was led by a 0.5% drop in the production of long-lasting manufactured goods, with motor vehicles and parts production decreasing 1.2%. The production of computers and peripheral equipment fell 1.4%, but rose 5.5% on a year-over-year basis.

Economists polled by Reuters had forecast an increase of 0.3%. The unexpected decline in factory output may be offset by rising costs, including higher oil prices, which are hovering above $100 a barrel due to the ongoing US-Israeli war with Iran.

Some economists believe that demand will soften as manufacturers pass on higher energy prices to consumers. Pantheon Macroeconomics' chief US economist, Samuel Tombs, expects manufacturing output to rise slightly over the next few months but fail to match the pace set in the first half of the year.