Tuesday 23 / April / 2024
Washington: Auto production and mining slowed sharply in October but not by enough to halt the continued and accelerating output by the US industrial sector, the government reported on Friday.
The production gains came despite the impact of back-to-back hurricanes in the past two months that crimped output, according to the Federal Reserve's monthly data, a strong sign for the US economy.
However, economists warn it is increasingly apparent manufacturing has peaked.
Industrial production rose just 0.1 per cent last month compared to the prior month, which was well below expectations, while output in September was revised down to a gain of 0.2 per cent.
The report said hurricanes dampened output in October and September, trimming about 0.1 per cent off production in each month.
But manufacturing remains robust, with an increase of 0.3 per cent in the latest month offsetting the less weighty mining and utilities sectors, which declined 0.3 per cent and 0.5 per cent respectively.
That fifth consecutive manufacturing gain came despite a 4.6 per cent plunge in motor vehicle production, which reversed the rise in September.
Excluding that decline in autos, as well as the drop in auto parts, manufacturing output would have increased 0.5 per cent.
The strong showing is a boost to the US economy, as overall output is up 4.1 per cent compared to October 2017.
In addition, the annual pace in the third quarter accelerated to 4.7 per cent, faster than previously reported due to a stronger estimate of crude oil extraction in August, Fed officials told AFP, which doubled the reported total gain in industrial production that month.
The Fed said overall mining output had gained 24 percent since its low point in 2016 and 13 percent since October 2017, driven by oil and gas, even as drilling had declined in the last two months.
However, there are increasing signs the days of rising output are coming to an end.
Economist Ian Shepherdson of Pantheon Macroeconomics said manufacturing indicators had peaked or were declining, so "we'd be very surprised to see output growth picking up further from here."
And the pace of production is "not enough to meet the strength of domestic demand, boosted by tax cuts, so the trade deficit will keep rising," he said in a research note.
Gregory Daco of Oxford Economics agreed "momentum is likely to cool further as we head into 2019."
He said, "fading tailwinds from tax stimulus and global demand, plus stronger headwinds from rising trade protectionism, higher interest rates and rising input costs are all likely to make Q3 the growth peak for IP."
Meanwhile, industrial capacity in use gained three-tenths 78.4 per cent, which was up from a year earlier but 2.1 points below its long-run average, the report said.
