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U.S. Industrial Production, Capacity Utilization Drop

Posted by Joseph Trevisani on Nov 15, 2013 11:04:00 AM

The output of U.S. factories, mines and utilities unexpectedly fell in October as a gain in manufacturing was overshadowed by declines in power generation and mining.

Industrial production fell 0.14 percent after surging an upwardly revised 0.65 percent in September, the Federal Reserve reported today.  It was the first negative reading since July. The rise in September had been the strongest since February.  Analysts in the Refutes poll had forecast a 0.2 percent addition.

Factory output, which accounts for 70 percent of industrial production though only about 15 percent of GDP, increased 0.3 percent, topping September's 0.1 percent increase. The service sector produces the balance of U.S GDP.

Utility production slipped 1.1 percent on the month following a 4.5 percent gain in September.  The output of the nation's mines declined 1.6 percent, the first drop in seven months.

Capacity utilization, the percentage of the country's industrial capacity at use, also dropped unexpectedly, falling 0.2 percent to 78.1 percent, for the lowest level in four months.

The economy has struggled since the recession ended in June 2009 to return to pre-crash production levels.

Since the beginning of 2011, utilization has averaged 77.3 percent per month, with a yearly breakdown of 76.5 percent in 2011, 77.6 percent in 2012 and 78.0 percent so far this year.

The ten year monthly average, including the collapse in 2008 and 2009 is 77.0 percent. The average in the decade before 2008, from January 1998 to December 2007 was 79.1 percent. The thirty year average is 79.1. The highest reading in the past three decades was 85.2 percent in January 1989; the lowest was 66.9 percent in June 2009.

In a separate release the Empire State Manufacturing Survey of General Business Conditions from the New York Federal Reserve fell to -2.21 in November from 1.52 the prior month. The prediction was for an increase to 5.00.

All of the major components of the current index were negative: new orders skidded to -5.53 from 7.75; shipments dropped to -0.53 from 13.12; inventories slipped to -1.32 from flat; the number of employees fell to 0.0 from 3.61 and the employee workweek decreased to -5.26 from 3.61.

The view of the business environment in six months by New York area executives was mixed.  The index for general business conditions fell to 37.51 in November from 40.76. Shipments rose to 37.80 from 32.18 and unfilled orders increased to 1.32 from -3.61. The index for the number of employees rose to 22.37 from 7.23 in October, the best measurement since April but the gauge for the average workweek dropped to -3.95 from 2.41.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

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