An employee works to manufacture diesel truck engines at the Cummins Mid-Range Engine Plant in Columbus, Indiana. US factory production increased 1.1% last month after an upwardly revised 0.4% advance in October, the Federal Reserve said yesterday.
Manufacturing output jumps 1.1% in November; factory capacity use highest since December 2007; New York state factory activity brakes sharply in December
Reuters
Washington
US manufacturing output recorded its largest increase in nine months in November as production expanded across the board, pointing to underlying strength in the economy.
Factory production increased 1.1% last month after an upwardly revised 0.4% advance in October, the Federal Reserve said yesterday.
“There is little evidence here that weaker global growth or a stronger dollar has hurt US manufacturing,” said John Ryding, chief economist at RDQ Economics in New York.
The upbeat factory data joined bullish employment and retail sales reports in suggesting strength in the economy, even as growth in the fourth quarter is expected to moderate sharply after two back-to-back quarters of robust expansion.
Wall Street had expected manufacturing output to rise only 0.5% in November after a previously reported 0.2% gain in October.
But the optimism over the manufacturing sector was tempered somewhat by a second report from the New York Federal Reserve showing its Empire State general business conditions index fell to -3.58 in December, the first contraction since January 2013, from a reading of 10.16 in November.
Economists said the New York Fed survey was volatile because of limited factory activity in the region.
“On balance, however, the weak reading is consistent with slower manufacturing activity late in the quarter,” said Jesse Hurwitz, an economist at Barclays in New York.
A third report showed homebuilder sentiment ebbed in December, though builders remained more optimistic than in the first half of the year.
The data comes a day before Federal Reserve officials gather for a two-day meeting to assess the economy’s health and deliberate on monetary policy.
Economists expect the US central bank to open the door a bit wider to interest rate hikes next year after the recent run of bullish data.
US stocks were trading slightly lower, while prices for Treasury debt fell. The dollar was up marginally against a basket of currencies.
Overall manufacturing output increased broadly in November, with a 5.1% jump in automobile production after three straight months of decline. There were also solid gains in machinery, apparel and leather, and petroleum and coal products.
Mining output slipped 0.1% last month, while utilities production jumped 5.1% as a cold snap boosted demand for utilities.
The gain in manufacturing and utilities combined to lift overall industrial production by 1.3% in November, the largest increase since May 2010.
The amount of manufacturing capacity in use last month rose to its highest since December 2007. Overall industrial capacity use hit its highest level in more than 6-1/2 years.
“The sharp rise in pace of capacity utilisation is of particular interest as it could be seen as an indication of accelerating resource slack absorption in the US economy,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
Officials at the Fed tend to look at capacity use as a signal of how much “slack” remains in the economy and how much room there is for growth to run before it becomes inflationary.