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Economy in Brief

U.S. Industrial Production Rebounds Modestly After Hurricanes
by Tom Moeller November 17, 2008

Industrial production recovered 1.3% last month after its 3.8% plummet during September when production was depressed by Hurricanes Gustav & Ike. September output was also held down by a strike at Boeing. Consensus expectations had been for no change in output last month.

During each of the last two months, the Fed indicated that industrial output fell 0.7%, excluding the hurricanes (which reduced mining output by 6.1%) and the strike.

Factory output recovered a modest 0.6% after falling 3.7% during September. Output of consumer goods recovered all of its 1.2% September drop but it was still off 2.8% y/y. Production of motor vehicles & parts dropped 3.5% (-18.4% y/y) but, excluding autos, output was still depressed. It recovered a modest 0.8% following the 4.0% plunge during September. Nonetheless, a 4.3% decline in factory output year-to-year compares to 2.0% growth during all of last year.

Industrial production in the high-tech sector is in a retrenchment mode. Output there fell 0.9% during October and that was the third consecutive monthly decline. And production was up just 9.9% y/y, the weakest gain since early 2005. Less both autos and high-tech, output inched up 0.2% last month following the 3.7% September plunge (-5.6% y/y).

The industry detail further reflected recession in the factory sector. Output of furniture & related products fell 2.9% last month for a 16.3% y/y decline. That was the largest y/y drop since the recession of 1975. Machinery production also reflected recession and it was down 1.7% (-6.9% y/y). A somewhat brighter spot was the 0.6% increase in electrical equipment production which left it down just 0.9% year-to-year. Apparel output, in the "recession-resistant" nondurables sector fell just 1.8% (-2.5% y/y. Production of chemicals recovered 5.1% after the 8.3% plunge due to the hurricanes. Reflecting the aftermath of the hurricanes was a 9.9% jump in output of petroleum & coal which recovered an 8.5% plummet.

Capacity utilization recovered to 76.4% which was still near its lowest level since 2003. Utilization in the factory sector of 73.8% also was near the lowest since 2003.

INDUSTRIAL PRODUCTION (SA, %) October September Y/Y 2007 2006 2005
Total Output 1.3 -3.8 1.3 1.7 2.2 3.3
   Manufacturing 0.6 -3.7 0.6 1.7 2.4 4.0
     Consumer Goods 1.4 -1.2 -2.8 1.7 0.3 2.8
     Business Equipment -2.2 -7.1 -8.8 3.3 10.4 7.3
     Construction Supplies -1.1 -1.9 -6.9 -2.5 2.2 4.5
  Utilities 0.4 2.5 -0.6 3.3 -0.6 2.1
Capacity Utilization 76.4 75.5 80.8 81.0 80.9 80.2
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