Factory Output Barely Rises After Tepid Gains in Prior Months
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U.S. factory output rose in October by less than expected after downward revisions to prior months, suggesting manufacturing is losing some steam as domestic and global demand moderates.
The 0.1% increase in factory production last month followed a downwardly revised 0.2% advance in September, according to Federal Reserve data released Nov. 16. Including mining and utilities, total industrial output fell 0.1% in October, the second decline in three months.
Manufacturing output was supported by motor vehicles as well as electrical equipment and aerospace transportation. Excluding autos, factory production stagnated, the weakest print in four months.
Nondurable manufacturing declined for the first time since June, dragged down by petroleum products and textiles.
With concerns brewing about next year’s demand environment as Fed policymakers ratchet up interest rates, the outlook is tenuous for manufacturers. Still, companies have continued to invest in equipment as they seek to boost productivity to help contain costs amid high inflation.
“Easing supply constraints are a positive for manufacturing,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. “But factory output faces headwinds from higher interest rates, which will weigh on demand and slow economic activity going forward.”
Higher borrowing costs, which have already taken a toll on home construction, risk diminishing capital spending appetites in other sectors as recession fears mount. Factory orders may also continue to weaken as many retailers look to reduce an inventory overhang.
— With assistance from Kristy Scheuble
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