AP News

Ahead of the Bell: US industrial production


WASHINGTON (AP) — Production at U.S. factories, mines and utilities likely showed a gain in September, rebounding after a big drop in August.

Economists were looking for industrial production to increase 0.3 percent in September, according to a survey by FactSet. The report will be released at 9:15 a.m. Eastern time on Tuesday.

In August, production fell 1.2 percent, the largest drop in more than three years.

Factories produced fewer cars and Hurricane Isaac triggered shutdowns along the Gulf Coast.

Expectations are higher for September after a closely watched survey showed manufacturing activity grew for the first time since May. The Institute for Supply Management said that its index of factory activity rose to 51.5. That's up from 49.6 in August.A reading above 50 signals growth and below 50 indicates contraction. The index had been below that threshold from June through August. Weak consumer spending and fewer exports slowed factory production in the spring.

The overall economy grew at a sluggish rate of just 1.3 percent in the April-June quarter, even slower than the 2 percent growth in the January-March period.

Economists believe that growth showed a modest rebound in the July-September quarter to a rate of around 2 percent. Still, growth at that level is too slow to make a significant dent in unemployment.

In September, the unemployment rate dropped to 7.8 percent from 8.1 percent in August. It was the first time the rate has been below 8 percent since January 2009. It snapped a 43-month streak in which unemployment was 8 percent or higher, a run that GOP presidential candidate Mitt Romney has been emphasizing to convince voters that President Barack Obama's economic policies have been a failure.

While recessions in Europe, triggered by a prolonged debt crisis, have slowed demand for American manufactured goods, consumer spending has shown signs of life in recent months. The government reported Monday that retail sales rose 1.1 percent in September following a 1.2 percent August gain. It was the strongest back-to-back gains in two years.

Part of that strength reflected a solid increase in auto sales. U.S. auto companies reported strong demand in September with U.S. sales up 13 percent from a year earlier to nearly 1.2 million.

Analysts think sales could hit 14.3 million this year, up 12.8 million last year. Analysts said that low interest rates, aging vehicles that need replacement and popular new models are fueling consistently strong sales this year.

Last month, the Federal Reserve announced a series of bold steps to boost financial markets and make borrowing cheap for years to come.

The Fed said it would spend $40 billion a month to buy mortgage bonds for as long as it deems necessary to make home buying more affordable. It also said it planned to keep short-term interest rates at record lows through mid-2015 — six months longer than previously planned. And the Fed said that it will not rush to begin raising rates once the economy shows signs of improving.


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