USA Manufacturing output fell 0.1% in October

US Industrial production figures for October showed a mixed picture on Nov. 17 as manufacturing output eased after several strong months, Federal Reserve data showed. Output at the nation’s factories, mines and utilities rose 0.1% after an average gain of 0.9% in the prior three months.

Manufacturing output fell 0.1% in the past month, after a jump of 0.8% in September. Factory production had also surged 1.4% in August and 1.2% in July, fueled by rising motor vehicle and parts production and a general pickup in economic activity.

In October, auto production fell 2%, reflecting some of the volatility from the government’s “cash for clunkers” program that spurred buying until the incentives ended in August.

Capacity utilization, a sign of slack in the industrial economy, moved up 0.2 percentage points to 70.7%. This is 10.2 percentage points below its average for 1972 through 2008.

Even with the latest rise, industrial production is down 7.1% from a year ago, reflecting the deep recession that has caused industries to slash output.

“This squares with other data in suggesting that the early quarters of the economic and manufacturing recovery will be constrained by issues related to the sources of demand. Since June, manufacturing output gains have been catalyzed by the normal inventory cycle, in which a leveling of the rapid depletion of stocks requires positive output adjustments, and by a range of fiscal policy programs which provide only a temporary stimulus,” said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI.

“But going forward, stubbornly high unemployment, historically low capacity utilization, and an uneven global economic recovery will prevent consumer, business, and export demand from producing as strong a recovery as might be expected following such a deep and risky economic and industrial downturn,” he added. “The weakness in the October production report was notably widespread with both business equipment and consumer goods industries showing slippage, the latter even beyond the expected retrenchment of policy-induced auto output gains. Such data suggest a modest manufacturing recovery for 2010, with factory output growth only beginning to accelerate to rates that will begin to absorb the large amount of unused capacity by 2011 and 2012.”

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