The Federal Reserve Board said that manufacturing production edged up modestly in October by 0.3 percent. This was the third consecutive gain in manufacturing output, following 0.7 percent and 0.1 percent increases in August and September, respectively. Year-over-year growth also picked up, rising from 2.6 percent in September to 3.3 percent in October. This was a definite improvement from the softness of the spring and early summer.
This suggests that the acceleration in manufacturing activity observed in other data continued into October. This was true despite the government shutdown.
Durable and nondurable goods production each increased by 0.3 percent each in October. In both cases, this reflected an acceleration from September’s gain of 0.1 percent for durable goods and the decline of 0.4 percent for nondurable goods. Over the past 12 months, durable goods output has risen 5.4 percent, with nondurable goods production up 1.5 percent.
On a sector-by-sector basis, the largest monthly gains in manufacturing production occurred in the printing and support furniture and related products (up 1.5 percent), miscellaneous durable goods (up 1.5 percent), primary metals (up 1.1 percent), fabricated metal products (up 0.9 percent), plastics and rubber products (up 0.8 percent), and computer and electronic products (up 0.7 percent) sectors.
In contrast, there were declines in output for motor vehicles (down 1.3 percent), apparel and leather products (down 0.3 percent), electrical equipment and appliances (down 0.3 percent), nonmetallic mineral products (down 0.3 percent), petroleum and coal products (down 0.3 percent), and machinery (down 0.2 percent).
The overall industrial production data reflected weaknesses in mining and utilities output, with total production down 0.1 percent for the month. Capacity utilization also fell, down from 78.3 percent to 78.1 percent. Year-over-year growth in industrial production, however, was up 3.3 percent, mirroring the progress noted above for the manufacturing sector.
In conclusion, manufacturing activity has begun to recover from weaker production data earlier this year. Softer domestic and global demand, combined with increased governmental uncertainties, lessened business confidence and overall production data. But, since July, we have seen an acceleration in new orders and output, with year-over-year rates returning to levels not seen since last November. The key will be for policymakers to help build on these gains by pursuing pro-growth strategies and – perhaps most of all – not creating additional headwinds.
Chad Moutray is the chief economist, National Association of Manufacturers.
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