Bloomberg News

Industrial Production in U.S. Increases on Cars, Computers

October 17, 2011

(Updates with closing market prices in sixth paragraph.)

Oct. 17 (Bloomberg) -- Industrial production in the U.S. advanced in September on growing demand for automobiles and computers after stalling the prior month, a sign manufacturers are contributing to growth.

Output at factories, mines and utilities increased 0.2 percent, in line with the median estimate in a Bloomberg News survey, after being little changed in August, figures from the Federal Reserve showed today. Factory production, which makes up 75 percent of the total, climbed for a third month.

Companies like General Motors Co. and Alcoa Inc. are getting a lift as Japan recovers from the earthquake and tsunami, and as demand from emerging markets and business investment boosts orders. At the same time, shipments to Europe may cool as the region’s debt crisis lingers, indicating factory assembly lines will probably not be running at full tilt.

“You can’t scare America into recession right now,” David Kelly, chief market strategist at JPMorgan Funds in New York, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. The data “have been quite good in the last few weeks,” said Kelly, who projects the economy grew at least at a 2 percent annual rate in the third quarter and possibly as much as 3 percent.

Survey Results

Estimates of the 75 economists surveyed by Bloomberg ranged from an increase of 0.5 percent to a drop of 0.3 percent. The Fed previously reported the August reading as a 0.2 percent increase. Manufacturing accounts for about 12 percent of the economy.

Stocks fell as a German government spokesman damped optimism of a quick fix to Europe’s debt crisis. The Standard & Poor’s 500 Index dropped 1.9 percent to 1,200.86 at the 4 p.m. close in New York. The decrease followed the gauge’s biggest weekly advance since 2009. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.16 percent from 2.25 percent late on Oct. 14.

Another report showed manufacturing in the New York region contracted in October at a faster pace than forecast, reflecting a lack of confidence in the recovery, even as measures of orders and sales improved. The Federal Reserve Bank of New York’s general economic index rose to minus 8.5 from minus 8.8 in September. Readings less than zero signal companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are cutting back.

Factory Output

Today’s industrial production report showed factory output climbed 0.4 percent after increasing 0.3 percent in August.

Capacity utilization, which measures the amount of a plant that is in use, increased to 77.4 percent from 77.3 percent in August. The gauge compares with the average of 79.5 percent over the past 20 years.

Mining production, which includes oil drilling, rose 0.8 percent. Utility output dropped 1.8 percent after decreasing 2.9 percent in August.

The output of motor vehicles and parts increased 0.7 percent after climbing 1.5 percent a month earlier, today’s report showed. Excluding autos and parts, manufacturing rose 0.3 percent in September for a second month.

Production of business equipment advanced 1 percent last month, reflecting a 1.9 percent gain in computer output. The increases signal investment in capital equipment continues to climb.

Auto Gains

Automobile manufacturing, which has recovered from supply chain disruptions related to Japan’s earthquake earlier this year, is supporting factories through the current period of sluggish growth. September vehicle sales rose to a 13 million seasonally adjusted annual rate, exceeding median forecast of analysts surveyed by Bloomberg and the strongest since April, according to industry data.

Detroit-based GM reported sales rose 20 percent in September from a year earlier, and company executives don’t believe the economy is falling back into a recession. Economic data “all point to a slow-growth scenario, not a double dip,” Don Johnson, GM vice president of U.S. sales, said on an Oct. 3 conference call.

Other indicators show manufacturing may have skirted a contraction after economic growth slowed in the first half of 2011 to weakest pace since the recession began.

The Institute for Supply Management’s factory index climbed to 51.6 last month from 50.6 in August, the Tempe, Arizona-based group said Oct. 3. A level greater than 50 signals expansion.

Global Demand

Alcoa, the largest U.S. aluminum producer, has looked past swinging stock markets and Europe’s sovereign debt crisis, as the company expects demand to recover. While the New-York based company posted profit last week that trailed analysts’ estimates as European customers cut back, it maintained its 2012 global demand growth forecast of 12 percent.

“We’ve seen strength in many of our markets despite the sharp slowdown in Europe that hurt our sequential results, and I’m more concerned about the lack of confidence than about market fundamentals,” Klaus Kleinfeld, Alcoa’s president and chief executive officer, said in an Oct. 11 call with analysts. “It almost looks like the world is worrying itself into another recession and that should not be allowed to happen.”

--With assistance from Chris Middleton in Washington and Betty Liu in New York. Editors: Carlos Torres, Christopher Wellisz

Company News: AA US <Equity> CN GM US <Equity> CN

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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