How 'bout some good news

October 16, 2014 06:43 AM

Industrial production in the U.S. rose in September by the most since November 2012, driven by a surge at utilities and a rebound in manufacturing.

The 1% advance in output at factories, mines and utilities exceeded the highest forecast in a Bloomberg survey and followed a 0.2% drop the prior month, Federal Reserve figures showed today in Washington. Utility production was the strongest since May 2012, while factories made strides even as motor vehicle output fell for a second month.

“The fact that we can get a 1% increase in production when you have a decline in the auto sector is striking,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. “There’s broad-based strength. Industrial production is solid.”

Corporate orders for equipment and sustained consumer spending on the heels of job gains, cheaper borrowing costs and lower gas prices kept factory floors busy last month. At the same time, a weakening in global markets could limit further progress in the pace of production.

Manufacturing, which makes up 75% of total production, climbed 0.5% in September, erasing the previous month’s decline, the Fed’s report showed.

The median forecast in a Bloomberg survey of 80 economists called for a 0.4% rise in total production. Estimates ranged from gains of 0.1% to 0.8% after a previously reported 0.1% decline in August.

Stocks Fall

Stocks dropped as equities around the world continued a selloff amid deepening concern that global growth is slowing. The Standard & Poor’s 500 Index declined 1.3% to 1,839.15 at 9:33 a.m. in New York.

Capacity utilization, which measures the amount of a plant in use, rose to 79.3% in September from 78.7% the prior month.

Utility output surged 3.9% after rising 1.2% in July. Mining production, which includes oil drilling, increased 1.8%, the most since April.

Production of business equipment rose 0.3% after a 0.2% decline in August, today’s report showed. Output of computers and electronic products increased 0.8% after a 1% gain. Factories also churned out more appliances and furniture in September.

Auto Production

Output of cars, trucks and parts decreased 1.4% after a 7% slump. Auto assemblies eased to an 11.56 million annualized rate, the slowest in five months, today’s report showed. Excluding vehicles and parts, factory production climbed 0.6% in September after no change.

Auto industry figures show car and truck sales, which have helped power production gains, cooled last month. Motor vehicles slowed in September to an annualized rate of 16.3 million, the weakest since April, from 17.5 million in August, according to data from Ward’s Automotive Group.

Ford Motor Co. is among those automakers that remain upbeat. The second-biggest U.S. carmaker is adding workers at its Dearborn, Michigan, plant as it prepares for its new aluminum-bodied F-150 pickup. The truck is scheduled to arrive in showrooms by the end of the year.

“These new jobs will help meet anticipated customer demand,” said Joe Hinrichs, Ford’s president of the Americas, during an Oct. 13 announcement. The company has hired more than 23,000 employees since 2011.

Today’s Fed data follows disappointing retail and manufacturing reports yesterday. Retail sales dropped more than forecast in September on a broad pullback in spending. Purchases of cars, furniture, building supplies and clothing fell.

Another report showed manufacturing in the New York area cooled in October. The Federal Reserve Bank of New York’s Empire State Index dropped to 6.2 from an almost five-year high of 27.5. The decrease from September was the biggest since November 2010.

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