U.S. manufacturing output rose for a fifth straight month in October, shrugging off a sharp drop in motor vehicle production and suggesting underlying strength in factory activity.
Lucia Mutikani of Reuters had the news:
The Federal Reserve said on Friday manufacturing production rose 0.3 percent last month. Data for September was revised up to show output at factories increasing 0.3 percent instead of advancing 0.2 percent as previously reported.
Economists polled by Reuters had forecast manufacturing output rising 0.2 percent in October. Manufacturing, which accounts for more than 12 percent of the economy, is expected to slow down next year in part as the stimulus from the Trump’s administration’s $1.5 trillion tax cut package fades.
Manufacturing surveys have suggested a moderation in factory activity amid labor shortages as well as more expensive raw materials caused by the White House’s protectionist trade policy.
A strong dollar, which has gained about 8.1 percent this year against the currencies of the United States’ main trade partners, is also hurting exports, and there are signs of slowing growth in other economies, including China.
Sharon Nunn and Eric Morath of The Wall Street Journal reported that consumer demand has helped:
Low unemployment and ramped up wage growth have helped spur consumer demand. At the same time, the late-2017 tax cuts helped stoke business investment, and the U.S. government has increased its defense spending. Rising crude prices in recent years helped the manufacturing industry too, though oil prices have declined in recent weeks.
Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, fell by 0.1 percentage point to 78.4% in October. Economists had expected 78.2%. Utilization has trended up in recent years, but remains 1.4 percentage points below its long-run average recorded from 1972 to 2017.
Manufacturing production has been rising since mid-2016, when rising oil prices helped reverse a hit to U.S. energy production. The manufacturing sector was hit hard by the 2007-09 recession and later by a big drop in oil prices, which hurt energy production. More broadly, it has been buffeted by years of competition from low-cost countries such as China.
Steve Goldstein of MarketWatch.com reported that the hurricanes had minimal impact:
The soft October belied a big upward shift in production from the third quarter, now estimated to have climbed 4.7% on an annual basis instead of a previously estimated 3.3%.
That, the Fed said, was mostly due to mining reaching an all-time high in August, which really was about booming oil and gas production.
Hurricanes lowered the level of industrial production in both September and October, but their effects appear to be less than 0.1% per month.
In October, the index for business equipment rose 0.8% and the index for defense and space equipment gained 0.9%. Both indexes have posted five consecutive months of gains, helped by the big spending bill earlier in the year that ramped up spending for defense in particular.
