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U.S. Manufacturing Production Unchanged, Missing Projections

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U.S. factory production was unchanged in November and the prior month’s reading was revised to a decline from a gain, a sign the industry may be taking a breather while still growing at a pace that supports economic growth.

Factory output was unchanged after a 0.1 percent decrease that was revised from a 0.3 percent gain, Federal Reserve data showed Friday. The results missed the Bloomberg survey median forecast for a 0.3 percent gain. Total industrial production, which also includes mines and utilities, increased 0.6 percent after a 0.2 percent drop that was also previously reported as an advance.

Key Insights

Excluding autos, manufacturing output stagnated for the second time in three months. The industry may be settling into a somewhat cooler pace, consistent with projections that economic growth will moderate this quarter and into next year, as the boost from lower corporate and consumer taxes wanes.

The slowdown in factory output included a 0.2 percent decline in business equipment and a third-straight drop in construction supplies. The data are weaker than the signal from a separate report that showed the Institute for Supply Management’s factory index rebounded in November from a six- month low.

Manufacturers also face headwinds including the trade war with China and rising borrowing costs, though the tight job market will underpin demand.

Capacity utilization, measuring the amount of a plant that is in use, increased to 78.5 percent from 78.1 percent. That’s just below the long-run average of 79.8 percent.

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  • Utility output jumped 3.3 percent after rising 0.2 percent the prior month. Mining production was up 1.7 percent after a 0.7 percent decline, with oil and gas well drilling rising a second month.
  • Production of motor vehicles and parts rose 0.3 percent, in sync with industry reports showing vehicle sales remain strong. Machinery output also rose.
  • While the Fed’s monthly data are volatile and often get revised, they offer insight into the health of manufacturing. The sector accounts for about 12 percent of the U.S. economy and makes up 75 percent of total industrial production.

    • Bloomberg

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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

    @dean_forex

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