BLBG: Industrial Production in U.S. Rose 0.1% in October (Update2)
By Bob Willis
Nov. 17 (Bloomberg) -- Industrial production in the U.S. rose less than forecast in October, restrained by a reduction in auto manufacturing as the effects of trade-in incentives dissipated and a decline in demand for business equipment.
Output at factories, mines and utilities rose 0.1 percent following an increase of 0.6 percent in September, the Federal Reserve said today in Washington. Manufacturing production fell for the first time in four months, while utility output jumped by the most since December.
Auto manufacturing declined following the biggest three- month surge since the 1970s and companies are staying cautious about the strength of the recovery with unemployment at a 26- year high. The labor market explains why “significant economic challenges remain,” Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York yesterday.
“We’re seeing improvement in fits and starts,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York, who correctly forecast the increase in production. “This is suggesting the recovery is going to be uneven.”
Industrial production was forecast to increase 0.4 percent after a previously reported 0.7 percent gain in September, according to the median estimate of 75 economists surveyed by Bloomberg News. Projections ranged from a gain of 1.2 percent to a drop of 0.3 percent.
Stocks declined after the Standard & Poor’s 500 Index rose to a 13-month high yesterday. The S&P 500 fell 0.2 percent to 1,107.58 at 9:44 a.m. in New York.
Plant-Use Rate
Capacity use rose to 70.7 percent last month from 70.5 percent in September. It was forecast to rise to 70.8 percent, according to the Bloomberg survey median.
Economists track plant operating rates to gauge factories’ ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher.
An earlier report from the Labor Department today showed prices paid to producers rose 0.3 percent in October, reflecting gains in fuel costs, while prices excluding food and energy fell 0.6 percent. From a year earlier, headline producer prices declined 1.9 percent.
The Fed’s report showed production at manufacturers declined 0.1 percent in October after a 0.8 percent increase. Production of business equipment fell 0.2 percent, while output of computers and electronics decreased 0.3 percent.
Utility production rose 1.6 percent and mining output, which includes oil drilling, decreased 0.2 percent.
Auto Production
Motor vehicle and parts production fell 1.7 percent following an 8.1 percent increase the prior month. Automobile production is moderating after surging in the three months through September as “cash-for-clunkers” incentives to buy cars expired in late August.
Consumer durable goods output, which includes automobiles, furniture and electronics, dropped 1.4 percent.
Production of industrial materials rose 0.3 percent in October.
Manufacturing has stabilized since June as exports rose from a three-year low in April. Factories have been selling more equipment and consumer goods as demand improves in overseas economies from Asia to Europe.
“Based on improving macroeconomic indicators and stabilization in our own demand trends, it appears we have reached the bottom of the cycle,” Keith Nosbusch, chief executive officer at Rockwell Automation, the Milwaukee-based maker of factory-automation software, said Nov. 9. “In this uncertain economic environment, I cannot predict the shape of the recovery, but I do not expect a sharp upturn.”
The overall economy grew at a 3.5 percent pace in the third quarter after four quarters of contraction. Economists surveyed by Bloomberg forecast growth of 3 percent in the current quarter, slowing to an average 2.6 percent for all of 2010.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
