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US manufacturing output strengthens, total output falls

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US manufacturing output strengthens, total output falls

US factory production was off to a strong start in the fourth quarter, despite falling output elsewhere in the economy. Manufacturing output expanded 0.3 percent in October and at an annualized rate of 3.3 percent, according to the Board of Governors of the Federal Reserve.

Durable goods rose 0.3 percent, accelerating 5.4 percent from year-ago levels. Metals, fabricated metals, furniture and miscellaneous manufacturing expanded between 0.9 percent and 1.5 percent in October, faster than other industry groups. The index for motor vehicles and related parts declined 1.3 percent after posting a 1.9 percent gain the prior month.

Steep declines in utilities and mining outpaced stronger than forecasted factory output. Utilities output declined 1.1 percent after a 4.5 percent gain the prior month. Mining output decreased 1.6 percent in October, the first drop in seven months. Production in the mining sector contracted due to Tropical Storm Karen, which halted production temporarily in the Gulf of Mexico. Total output fell 0.1 percent in response to weak utilities and mining indicators.

Capacity utilization, which measures production capacity actually used, fell 0.2 percentage points to 78.1 percent. The monthly reading was 1.1 percentage points higher than year-ago levels, but 2.1 percentage points below its 40-year long-run average.

The monthly report shows businesses upped their orders and output during the 16-day government shutdown. The manufacturing industry has been a strong contributor to US recovery. Manufacturing activity expanded at the fastest pace in two-and-a-half years last month, according to the Institute for Supply Management. The manufacturing industry grew for the 53rd consecutive month in October, according to ISM.

“We’ve seen decent growth in manufacturing,” said Brian Jones of New York-based Societe Generale. Strong demand in manufacturing is going to help maintain the pace of economic recovery, Jones would later add. Important data on manufacturing will make headlines next week, led by Markit Group’s monthly PMI indicator and the Philadelphia Fed’s manufacturing survey.

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