Electronics production is expanding significantly faster than end-market customers, after excluding the adjustment to the semiconductor index for added functions such as a new design with denser memory.

The initial surge in production was needed to restock channels after an inventory absorption period. But surplus stock will accumulate if production gains continue at a well-above-trend pace for a few more months. With U.S. manufacturing and distribution inventories reported at a record lean level relative to sales, any parts surplus currently would again be in Asia.

U.S. factories boosted electronics production 1.9 percent in August from July. The July over June gain was 2.2 percent. All other U.S. manufacturers raised August production 0.2 percent after no gain in July. Machinery output fell 0.6 percent over July and August and motor vehicle production rose 1.8 percent. Production in both of these end markets is 5 percent to 6 percent higher than a year ago compared to an 18 percent gain for electronics.

August production increased 2.8 percent for semiconductors and components, 2.4 percent for telecom equipment, 2.2 percent for instruments and 0.8 percent for computers, peripherals and storage devices.