BCN-24 US industrial output gains in October despite drop in autos

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US industrial output gains in October despite drop in autos

WASHINGTON, Nov 17, 2018 (BSS/AFP) – 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 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 percent 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 percent.

The report said hurricanes dampened output in October and September,
trimming about 0.1 percent off production in each month.

But manufacturing remains robust, with an increase of 0.3 percent in the
latest month offsetting the less weighty mining and utilities sectors, which
declined 0.3 percent and 0.5 percent respectively.

That fifth consecutive manufacturing gain came despite a 4.6 percent 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 percent.

The strong showing is a boost to the US economy, as overall output is up
4.1 percent compared to October 2017.

– Manufacturing peak? –

In addition, the annual pace in the third quarter accelerated to 4.7
percent, 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.

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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 percent,
which was up from a year earlier but 2.1 points below its long-run average,
the report said.

BSS/AFP/SR/1850 HRS