Bloomberg News

Industrial Production in U.S. Probably Rose for Fifth Month

October 17, 2011

Oct. 17 (Bloomberg) -- Industrial production in the U.S. probably advanced in September for a fifth consecutive month, a sign manufacturers are contributing to growth, economists said before reports today.

Production at factories, mines and utilities increased 0.2 percent, the same as in August, according to the median forecast of 67 economists surveyed by Bloomberg News. Another report may show manufacturing in the New York region contracted at a slower pace in October than in the prior 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.

“Autos remain a favorable factor for the manufacturing environment in general, and we’re going to continue to see demand improvements,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit.

The Federal Reserve’s production data are due at 9:15 a.m. in Washington. Economists’ estimates ranged from a drop of 0.3 percent to a 0.5 percent increase.

Other indicators show manufacturing, which accounts for about 75 percent of industrial production, may have skirted a prolonged contraction after economic growth slowed in the first half of 2011 to weakest pace since the recession began.

Factories Expanding

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.

“There is some minor momentum in the economy,” Federal Reserve Bank of Dallas President Richard Fisher said in an Oct. 3 interview on Bloomberg Radio. Business leaders he knows are saying “that they are barely moving forward, but they are not moving backward.”

The Federal Reserve Bank of New York’s general economic index, due at 8:30 a.m., probably rose to minus 4 from minus 8.8 in September, according to the median forecast. Readings less than zero show companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are cutting back.

Automobile manufacturing, which has recovered from supply chain disruptions related to Japan’s earthquake earlier this year, is probably 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.

Auto Sales

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.

Alcoa, the largest U.S. aluminum producer, has looked past swinging stock markets and Europe’s sovereign debt crisis, saying they expect 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 with analysts. “It almost looks like the world is worrying itself into another recession and that should not be allowed to happen.”

The Standard & Poor’s Supercomposite Machinery Index has climbed 20 percent since Oct. 3, when it hit the lowest level in more than a year. That compares with an 11 percent gain in the broader S&P 500 Index in the same period.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Vince Golle

Company News: GM US <Equity> CN AA 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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