U.S. Factory Production Drops for First Time in Three Months

U.S. factory output dropped in November for the first time in three months, showing an anemic recovery in manufacturing after an extended slowdown.

Production at factories, which make up 75 percent of all output, fell 0.1 percent, a Federal Reserve report showed Wednesday. The median forecast in a Bloomberg survey called for a 0.2 percent drop. Total industrial output, which includes mines and utilities, decreased 0.4 percent, the biggest decline since March, as utility use slowed with warmer-than-usual temperatures.

American manufacturing is barely expanding as global demand and domestic business investment remain uninspiring. While factory customers have made progress trimming bloated inventories and consumer spending is holding up, a recent spike in the value of the dollar represents a new challenge for the nation’s producers.

“The manufacturing sector is flat to positive, on trend,” David Sloan, senior economist at 4CAST-RGE in New York, said before the report. “The exports outlook isn’t very strong, but exports have been reasonably resilient.”

Estimates in the Bloomberg survey for manufacturing output, which accounts for about 12 percent of the economy, ranged from a 0.8 percent decline to an increase of 0.2 percent. The previous month’s reading was revised to a 0.3 percent gain, from 0.2 percent.

For total industrial production, the Bloomberg survey of 80 economists showed estimates ranging from a decrease of 0.8 percent to a rise of 0.5 percent. The prior month was revised to a 0.1 percent increase, after being initially reported as little changed.

Capacity utilization, which measures the amount of a plant that is in use, eased to 75 percent in November, the weakest since March, from 75.4 percent the prior month.

Utility output decreased 4.4 percent after October’s 2.8 percent decline. Last month was the second-warmest November for the contiguous U.S. in records dating to 1895, according to the National Oceanic and Atmospheric Administration.

Mining production, including oil drilling, climbed 1.1 percent in November after a 1.9 percent increase. Drilling of oil and gas wells rose 5.3 percent.

The U.S. rotary rig count has been steadily rising for six months after a relentless slide that started at the end of 2014, according to Baker Hughes Inc. data. Rebounding energy prices are giving a lift to the count. The number of rigs increased to 624 in the week ended Dec. 9 from 597 in the prior period.

Consumer durable goods output dropped 1.6 percent last month after a 0.8 percent gain in October. Business equipment production was down 0.3 percent following a 0.1 percent increase.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell