U.S. manufacturing production rises steadily in October

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WASHINGTON (Reuters) – U.S. manufacturing output increased for a fifth straight month in October, shrugging off a sharp decline in motor vehicle production and suggesting underlying strength in factory activity despite signs of a slowdown in the sector.

U.S. manufacturing production rises steadily in October

FILE PHOTO – Assembly workers work on the underside of 2015 Ford Mustang vehicles on the production line at the Ford Motor Flat Rock Assembly Plant in Flat Rock, Michigan, August 20, 2015. REUTERS/Rebecca Cook

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.

Motor vehicle production slumped 2.8 percent after increasing 1.3 percent in September. Excluding motor vehicles and parts, manufacturing gained a solid 0.5 percent last month, boosted by a strong increase in the output of business equipment. That followed a 0.2 percent rise in September.

U.S. financial markets were little moved by the data.

Manufacturing, which accounts for about 12 percent of the economy, is being supported by a strong domestic economy. But growing capacity constraints amid labor shortages and more expensive raw materials are slowing momentum. A strong dollar and cooling global growth are restraining exports.

Reports on Thursday offered a mixed picture of regional manufacturing activity in early November. Factory activity in New York state expanded moderately this month, but it slowed sharply in the mid-Atlantic region.

October’s rise in manufacturing production offset decreases in mining and utilities output, leading to a 0.1 percent gain in industrial production last month. Industrial output rose 0.2 percent in September.

The Fed said Hurricanes Florence and Michael had lowered the level of industrial production in both September and October, but the effects of the storms “appear to be less than 0.1 percent per month.”

Mining output fell 0.3 percent in October after slipping 0.1 percent in September. Oil and gas well drilling rebounded 1.6 percent after declining for three straight months.

Utilities output dropped 0.5 percent in October after dipping 0.1 percent in the prior month.

Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, rose to 76.2 percent in October, the highest since July 2015, from 76.1 percent in September. Overall capacity use for the industrial sector fell to 78.4 percent from 78.5 in September. It is 1.4 percentage points below its 1972-to-2017 average.

Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy — how far growth has room to run before it becomes inflationary.

Reporting by Lucia Mutikani; Editing by Paul Simao