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Economy in Brief

U.S. Factory Production Climbs For Third Month While Plant Utilization Reaches Seven-Month High
by Tom Moeller October 16, 2009

Industrial production is hardly overheating, but the nation's industrial plant is starting to hum again. Output rose a surprising 0.7% during September after gains of 1.2% and 0.8% during the prior two months. An uptick of a meager 0.1% had been the Consensus expectation, based on the decline in factory sector employment last month. The productivity of those still working thus soared. The recent output recovery follows a decline of 14.5% during the 21 months of recession beginning in January of 2008.

Output of consumer goods rose a firm 1.1% for the third month of increase following a 10.1% drop during the recession. Production of autos led the increase with a 7.3% rise, after two months of decline and a recession loss of 38.5%. Furniture & appliance output rose a lesser 0.3% which was the second in the last three months. Working the other way, the output of computers, video & audio equipment showed no sign of recovery, posting a 1.4% (-16.5% y/y) decline. Outside of the auto and high-tech sectors output ticked 0.3% higher (-5.3% y/y) during September for the third consecutive monthly gain. That's against the 12.8% decline during the prior 21 months.

Apparel output rose for third consecutive month of strong gain and the 2.2% increase cut the y/y decline to 11.4%. The output of business equipment rose 0.2% (-8.0% y/y) but the output of construction supplies continued 0.4% (-16.8% y/y) lower after four months of relative stability. Construction supplies output fell 23.4% during this recession.

Excess industrial capacity diminished during September for the third consecutive month. In the factory sector alone, the rise to 67.5% also was the third consecutive monthly gain but it nevertheless left the figure near its lowest of the postwar period. Across industries, utilization remained the smallest since WWII.

The industrial production data are available in Haver's USECON database.

INDUSTRIAL PRODUCTION (SA, %) September August Y/Y 2008 2007 2006
Total Output 0.7 1.2 -6.0 -2.2 1.5 2.3
   Manufacturing 0.8 1.2 -7.8 -3.2 1.4 2.5
     Consumer Goods 1.1 1.5 -1.8 -2.6 0.9 0.4
     Business Equipment 0.2 1.1 -8.0 -1.1 2.7 9.4
     Construction Supplies -0.4 0.5 -16.8 -6.3 -2.0 2.3
  Utilities -0.7 1.9 -2.1 0.3 3.4 -0.6
Capacity Utilization 70.5 69.9 74.5 (Sept. '08) 77.5 80.6 80.9
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