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Factory Output Doubles Forecast in October

Posted by Joseph Trevisani on Nov 16, 2017 12:42:46 PM

Manufacturing production in October jumped to its highest level this year as the oil and petrochemical industry on the Gulf Coast returned to normal after the devastation of Hurricane Harvey in late August.

Factory output spiked 1.3 percent last month, far outstripping the 0.6 percent prediction and equaling the April gain for the largest increase since May 2010, according to the Federal Reserve on Thursday. September's production was revised up to 0.4 percent from 0.1 percent.  Together the last two months were the best consecutive performance from the manufacturing sector in seven years. 

Overall industrial production which includes mines and electrical and gas utilities advanced 0.9 percent , the most in six months, after  September's upwardly revised 0.4 percent gain. 

The Federal Reserve estimated that without the extensive flooding from Harvey in the Houston are that forced the closing of refineries in September, nationwide factory output would have risen 0.2 percent in October and industrial production would have increased 0.3 percent. 

Gains in manufacturing output were widespread with consumer goods, construction materials and business equipment seeing improvement. 

The positive outlook in the factory sector is mirrored by optimism among business managers. Though the Institute for Supply Management's November manufacturing index slipped slightly to 58.7 in November from October's 60.8, the two months reflect the best attitudes in business in more than 13 years.  The production environment takes its cue from strong consumer spending in the United States and improving economies overseas, especially in Europe. . October's 1.9 percent increase in U.S. retail sales was the second largest monthly gain in consumption since the recession. Only the 2.2 percent spurt in March 2010 was bigger. 

Capacity utilization, which measures the amount of the industrial plant that is in use, climbed to 77.0 percent from 76.4 percent. It was the highest reading since April 2015.  The median prediction was 76.4 percent. 

Industrial Production Details

  • Consumer goods output rose 0.9 percent, business equipment gained 0.5 percent, and construction materials climbed 0.4 percent
  • Utility output increased 2 percent after falling 1 percent in September.
  • Motor vehicle productions rose 1 percent. Mining output, which includes oil and gas drilling fell 1.3 percent. 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Thompson/Reuters, WorldWideMarkets

Factory Output

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Industrial Production

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