U.S. factory production increased for a fourth straight month in August, but the recovery is showing signs of strain, suggesting business investment in equipment could remain depressed through the end of the year as the COVID-19 pandemic drags on.

The report from the Federal Reserve on Tuesday added to data on the labor market that has indicated a stall in overall economic activity because of the coronavirus’ persistence and fading fiscal stimulus. The ebbing economic recovery, accompanied by warming inflation, is likely to dominate the U.S. central bank’s two-day policy meeting, which started Tuesday.

“It is looking increasingly like the recovery in factory production will stall in coming months if no one from Washington is going to ride to the rescue with another pandemic stimulus package,” said Chris Rupkey, chief economist at MUFG in New York.

“The coronavirus has made the public cautious and this uncertainty is keeping factories from opening back up completely.”

Manufacturing production rose 1 percent last month after advancing 3.9 percent in July. The Fed noted that “the gains for most manufacturing industries have gradually slowed since June.” Factory output remains 6.7 percent below its February level.

Economists polled had forecast manufacturing output would rise 1.2 percent in August.

Government financial aid to businesses and the unemployed has virtually dried up, and talks on another package are at an impasse. At least 29.6 million people were on unemployment benefits in August. Government money was credited for the sharp rebound in economic activity. Cheaper crude oil because of the pandemic is also hurting oilfield services and equipment firms.

The International Energy Agency on Tuesday slashed its 2020 oil demand forecast, warning “the outlook appears even more fragile.”

Brent crude is trading around US$40 a barrel. Business spending on equipment has declined for five straight quarters.

A separate report from the New York Fed on Tuesday showed manufacturing conditions in New York state improving further in September, but the lingering virus was seen restricting activity.

“Weak demand, supply chain disruptions, and fears of a virus resurgence will weigh on the manufacturing sector’s recovery until a health solution is discovered and broadly available,” said Oren Klachkin, lead U.S. economist at Oxford Economics in New York.

Last month, production of long-lasting manufactured goods increased 0.7 percent. Motor vehicle production, however, dropped 3.7 percent after accelerating 31.7 percent in July. There were increases in the output of machinery, furniture, computer and electronic products as well as electrical equipment, appliances and components, goods that complement life under the pandemic.

Production of apparel and leather products increased as did the output of plastics and rubber goods.

The rise in manufacturing offset declines in both mining and utilities output, lifting industrial production 0.4 percent in August. Industrial output rose 3.5 percent in July. (SD-Agencies)