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US industrial production in November posts biggest gain in more than 4 years

H.S. Borji
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US industrial production rebounded at a staggering rate in November, as factory activity surged in response to bigger demand for consumer goods and business equipment in the latest sign manufacturing output was boosting economic growth.

Total industrial production increased 1.3 percent in November following a gain of 0.1 percent the previous month that was originally reported as a loss, the Board of Governors of the Federal Reserve System reported today in Washington. That was the biggest gain since May 2010. Economists forecast industrial production to rebound 0.7 percent in November.

Compared to November 2013, industrial production was up 5.2 percent.

Manufacturing production, which represents approximately 12 percent of the US economy and three-quarters of total production, advanced 1.1 percent, following a revised gain of 0.4 percent in October. That was the biggest gain in nine months.

Manufacturing output remained elevated in November, as new orders and production levels rose at a solid rate, the Institute for Supply Management said in its latest industry report. ISM’s gauge of US factory activity eased slightly to 58.7 from 59.0, as 14 of the 18 manufacturing industries posted gains. The gauge has been above the 50.0 mark that separates expansion from contraction for 18 consecutive months.

Output in the mining sector, which includes oil drilling, decreased 0.1 percent in November following a downwardly revised drop of 1 percent the previous month. Compared to year ago levels, mining production was up 9.3 percent.

Utilities output surged 5.1 percent in November, the biggest gain in almost eight years. Year-on-year, utilities production was up 1.8 percent, official data showed.

Among the major market groups, the production of consumer goods rose 2.5 percent. Year-on-year, consumer goods production increased 4.6 percent.

The production of business equipment rose 2.3 percent. That translated into an annualized gain of 6.5 percent.

Nonindustrial supplies were up 1 percent. Year-on-year, this component grew 4 percent.

Materials output rebounded 0.8 percent. Year-on-year, this component was up 6 percent, official data showed.

Industrial capacity utilization, which measures how fully US companies are using their factory resources, rose to 80.1 percent from 79.3 percent, well above forecasts calling for no change. November witnessed the highest capacity utilization rate since March 2008, as the leading indicator equaled its long-run (1972-2013) average.

Today’s figures clearly indicate factory output was supporting economic growth at the end of the year, which bodes well for fourth quarter growth estimates. The US economy surprised to the upside in the third quarter, growing 3.9 percent year-on-year thanks to upward revisions to business spending, consumer spending and inventories. Economists had expected a downward revision to 3.3 percent after an advance estimate of 3.5 percent.

The second and third quarters were the strongest back-to-back quarters of GDP growth since the latter half of 2013, underscoring the strength of the US recovery after the slowdown at the start of the year.

The Commerce Department will post revised third quarter GDP figures, which are based on more complete data, on December 23. Economists expect another upward revision to third quarter estimates.

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