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Economy in Brief

U.S. Industrial Production Decline Broad and Unexpected
by Tom Moeller November 16, 2007

Industrial production declined during October versus a Consensus expectation for a 0.1% uptick. The decline was the first since January and it was the largest m/m in two years. Because of modest 0.2% gains during the prior two months the three month growth in industrial output fell to -0.7% (AR), its first time negative since early this year.

Factory output also was down and posted a 0.4% drop, its second 0.4% decline in the last three months. Those declines felled the three month growth rate to -2.7%, its first time negative since late lat year.

Easier output was broad based. Production in the motor vehicle & parts industries dropped 0.9% (+0.9% y/y). Output of furniture & related products suffered the weakness in the housing industry with a 0.2% (-2.6% y/y) decline while output of construction supplies fell 0.4% (+0.1% y/y), the forth consecutive monthly decline.

Returning to the consumer goods sector, production of computers & electronics fell 0.9% (+14.6% y/y), down for the third straight month. Apparel output also fell for the third consecutive month (-4.6% y/y). Chemical products output fell as well by 0.5% (-1.3% y/y).

Output of business equipment held up with just a 0.1% decline (+4.6% y/y). Output of information & processing equipment, however, fell 0.3% and the three month growth fell to 2.9% versus double digit rates of growth earlier this year. Production of industrial equipment also has eased and it posted its second decline in the last three months. Three month growth rate fell to a negative 2.6% (AR).

In the materials category output fell 0.4%. Production of durable consumer parts fell 0.5%, unchanged over the last year and down for the second consecutive month. Production of durable equipment parts rose 0.3% (6.3% y/y) but other durable goods materials output fell 0.3% (+2.9% y/y).

Capacity utilization fell to 80.1%. Utilization in the factory sector fell m/m to 79.9% versus an average 80.2% last year. Capacity rose 0.1% (1.9% y/y).

Risk Management and the Economic Outlook is today's speech by Fed GovernorRandall S. Kroszner and it is available here.

INDUSTRIAL PRODUCTION (SA) October September Y/Y 2006 2005 2004
Total -0.5% 0.2% 1.8% 4.0% 3.2% 2.5%
Manufacturing -0.4% 0.2% 2.1% 5.0% 4.0% 3.0%
Mining -0.6% 0.6% 0.4% 2.7% -1.6% -0.6%
Utilities -1.6% -0.1% 0.1% 0.2% 2.0% 1.4%
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