U.S. factory production expanded in October for a fifth straight month, the longest streak since 2011 and indicating a solid start to the fourth quarter, Federal Reserve data shows.
Manufacturing output rose 0.3 percent after an upwardly revised 0.3 percent gain in the prior month. Economists had projected a median increase of 0.2 percent. Total industrial production, which also includes mining and utilities, increased a below-forecast 0.1 percent, reflecting declines in those sectors.
Key Insights
Factory output continued to grow at a solid clip, supported by a range of sectors including metals, machinery, aerospace and furniture.
While buoyant consumer demand and this year’s corporate tax cuts have helped boost production, the sector faces headwinds including higher costs for materials and supply constraints partly linked to the trade war with China.
The industrial production figures reflect a 0.5 percent decline in utility output, the biggest drop since June, and a 0.3 percent decrease in mining, the largest decline since January.
Hurricanes Florence and Michael, which made landfall in September and October respectively, lowered industrial production during the two months, “but their effects appear to be less than 0.1 percent per month,” the Fed said.
Capacity utilization, measuring the amount of a plant that’s in use, eased to 78.4 percent from an upwardly revised 78.5 percent in the prior two months, the highest since January 2015. That compares with the long-run average of 79.8 percent.
What Economists Say
Industrial production in October was held back by softness in mining and utilities. Yet the manufacturing sector — by far the largest component of the headline index — continued to exhibit solid growth, a sign that trade tensions have not affected demand for industrial goods. —Tim Mahedy and Yelena Shulyatyeva, Bloomberg Economics
To Note
Production of motor vehicles and parts decreased the most since May; excluding autos and parts, manufacturing output rose 0.5 percent.
While energy production fell 0.3 percent in October, oil and natural-gas well drilling was up 1.6 percent.
Production of consumer goods rose 0.2 percent, output of business equipment climbed 0.8 percent and machinery production was up 1.2 percent.
The data compared with an Institute for Supply Management survey showing production rose at a slower pace in October compared with the prior month.
The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up three-fourths of total industrial production, accounts for about 12 percent of the U.S. economy.
