U.S. Industrial Production Slipped in October

Industrial production unexpectedly slipped 0.1% m/m (+3.3% y/y) in October following a downwardly revised 0.1% monthly increase in September (initially +0.4% m/m). The Action Economics Forecast Survey had looked for a 0.2% monthly gain. This was the fourth monthly decline in the past six months, pointing to an industrial sector stressed by a slowing global economy and an aggressive tightening of U.S. monetary policy.

Manufacturing output managed a 0.1% m/m (2.4% y/y) gain in October, the fourth consecutive monthly increase. By contrast, mining production fell 0.4% m/m (+6.9% y/y), its second decline in the past three months. Utilities production decreased 1.5% m/m (+2.5% y/y) in October following a downwardly revised 1.7% monthly decline in September (initially -0.3% m/m).

The rate of capacity utilization fell to 79.9% in October from a downwardly revised 80.1% in September (initially 80.4%, which had been the expansion high). This was the lowest reading in four months. The rate of capacity utilization has been little changed since the spring. The rate of capacity utilization in manufacturing was unchanged at 79.5% in October. Its expansion peak was 80.0% in April. While moving sideways over the past several months, manufacturing capacity utilization remains considerably higher than during the entire decade-long expansion that followed the Great Recession and indicates that manufacturing production may be nearing supply constraints.

By industry group, the slight increase in manufacturing output reflected a 0.5% m/m gain in durable goods production and a 0.3% m/m decline in production of nondurable goods. Durable goods production was led by a 2.0% m/m increase in motor vehicle output, a 1.9% m/m gain in the production of electrical equipment and appliances, and a 1.9% monthly increase in the production of aerospace and other transportation equipment. By contrast, production of wood products fell 2.5% m/m, their seventh consecutive monthly decline, output of nonmetallic mineral products decreased 1.2% m/m, and furniture production declined 0.5% m/m. The decline in nondurables production was dominated by a 1.9% m/m drop in the output of petroleum and coal products, the first decline in four months.

By market groups, the production of consumer goods edged up 0.1% m/m in October, just offsetting a 0.1% monthly decline in September. This category has been essentially unchanged for the past three months. By contrast, output of business equipment rose a solid 0.8% m/m, the same increase as in September. Business equipment production has risen 3.3% since June. Construction supplies fell 0.7% m/m in October, their third decline in the past five months.

In special classifications, energy output declined 0.9% m/m in October, its second decline in the past three months. Output of selected high-tech industries slumped 0.6% m/m following no change in September. Manufacturing output excluding selected high-tech industries increased 0.2% m/m, the same rise as in September. Production of motor vehicles and parts jumped up 2.0% m/m in October after a 0.4% monthly increase in September. Manufacturing output excluding selected high-tech industries and motor vehicles was unchanged in October following a 0.2% monthly increase in September.

Industrial production and capacity are located in Haver's USECON database. Additional detail on production and capacity utilization can be found in the IP database. The expectations figures come from the AS1REPNA database.