US Industrial Output Growth Weaker than Expected

US industrial output edged up 0.1 percent from a month earlier in October 2018, following a downwardly revised 0.2 percent advance in September and missing market expectations of a 0.2 percent gain. An increase in manufacturing production was partially offset by declines in both mining and utilities output. Hurricanes lowered the level of industrial production in both September and October, but their effects appear to be less than 0.1 percent per month.

Manufacturing production moved up 0.3 percent in October, the same pace as in the previous month and marking its fifth consecutive monthly increase. Durable manufacturing rose 0.5 percent, the same as in September, due to production of machinery (1.2 percent vs 0.9 percent); computer and electronic products (0.2 percent vs 0.1 percent); primary metals (3 percent vs 0.9 percent); and fabricated metal products (0.2 percent vs 0.1 percent). On the other hand, there was a contraction in production of both motor vehicles and parts (-2.8 percent vs 1.3 percent) and electrical equipment, appliances, and components (-0.3 percent vs -0.1 percent). In addition, nondurable manufacturing edged up 0.2 percent, after being unchanged in September, due to increases in production of food, beverage, and tobacco products (0.5 percent vs 0.3 percent) and chemicals (0.3 percent vs -0.4 percent). By contrast, petroleum and coal products output contracted (-1.1 percent vs 0.5 percent).

Mining output declined 0.3 percent in October after a 0.1 percent fall in September. After reaching an all-time high in August, primarily as a result of gains in the oil and gas sector, production slipped slightly over the past two months.

The index for utilities dropped 0.5 percent in October, following a 0.1 percent contraction in the previous month, as a decrease for electric utilities (-1.9 percent vs -0.6 percent) was partially offset by a large increase for natural gas utilities (8.6 percent vs 3.4 percent).

Capacity utilization for the industrial sector was 78.4 percent, a rate that is 1.4 percentage points below its long-run (1972–2017) average. Capacity utilization for manufacturing edged up in October to 76.2 percent—with gains for durables and nondurables and a loss for other manufacturing (publishing and logging)—but it was still 2.1 percentage points below its long-run average. The utilization rate for mining fell to 92.7 percent but remained well above its long-run average of 87.0 percent. The operating rate for utilities moved down to 77.3 percent, a rate that is 8.0 percentage points below its long-run average.

US Industrial Output Growth Weaker than Expected

Federal Reserve | Joana Ferreira |
11/16/2018 2:33:28 PM