US car production slipped in August

Thomson ReutersA 2015 Ford Mustang vehicle moves down the production line at the Ford Motor Flat Rock Assembly Plant in Flat Rock, Michigan,

U.S. manufacturing output contracted more than expected in August, dragged down by a sharp fall in auto production that could moderate economic growth in the third quarter.

American factories churned out 0.5 percent fewer goods last month, the Federal Reserve said on Tuesday.

Some slowdown was anticipated after an earlier survey of factory manager sentiment pointed to a sharp brake in activity.

Analysts polled by Reuters had expected a 0.3 percent decline in factory output.

The drop, combined with a fall in mining production and higher output for utilities, left overall industrial output 0.4 percent lower during the month.

Auto and autopart production contracted 6.4 percent, reversing much of the strong gains registered in July. Some of the slowdown in factory production could be due to a stronger dollar that is crimping exports, although sturdy domestic auto sales have given more reassuring signs for the economic outlook.

US automakers have been reluctant to add capacity during the current surge in auto sales. The concern is that the US market, currently on track for a 17.5-million new-sales pace in 2015, will slow, leaving the likes of GM and Ford with under-used assembly lines.

Capacity utilization in the factory sector fell to 77.6 percent last month from 78.0 percent.

(Reporting by Jason Lange; Editing by Andrea Ricci)