Bloomberg News

Industrial Production in U.S. Probably Expanded at Slower Pace

December 15, 2011

Dec. 15 (Bloomberg) -- Industrial production in the U.S. probably cooled in November as slowdowns in automobile output and mining overshadowed broader manufacturing strength, economists said before reports today.

Production at factories, mines and utilities increased 0.1 percent after advancing 0.7 percent in October, according to the median forecast of 82 economists surveyed by Bloomberg News. Manufacturing in the New York and Philadelphia regions picked up in December, a sign the industry is weathering slower global growth, a pair of regional reports may also show.

Factory floors are staying busy as a government tax incentive helps sustain business investment and a drop in inventories last quarter drives new orders from purchasing managers. At the same time, a slowing economy in Europe may limit shipments from American manufacturers and restrain the industry that’s been a source of strength for the recovery.

“Away from a drop in auto production, manufacturing output is pretty decent,” said Brian Jones, a senior U.S. economist at Societe Generale in New York.

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

Vehicle assembly slowed in November relative to the prior month, Jones said, citing figures from Ward’s Automotive data. The pace of mining may cool as well after a 2.3 percent jump in October that was the biggest since January 2010, he said.

Fed Survey

Manufacturing “grew at a steady pace across most of the country, with all districts other than St. Louis reporting increases in orders, shipments, or production,” the Fed said in its Beige Book survey released Nov. 30.

The Institute for Supply Management’s national index of manufacturing, which rose last month, corroborated the Fed report. The barometer’s measures of production and new orders climbed at the fastest rate since April.

“It’s been a great year, it goes almost against logic in terms of what you read in the papers with the economy,” Claude Jordan, president and chief executive officer of Arctic Cat Inc., which makes all-terrain recreational vehicles, said during a Dec. 6 investor conference. Jordan said he was “feeling good about where we stand today, a lot of that’s due to lower dealer inventories, pent-up demand.”

Regional Data

Regional reports indicate the strength continued into this month. The Federal Reserve Bank of New York’s general economic index, due at 8:30 a.m., probably accelerated to 3 from 0.6 in November, according to the median forecast. Readings greater than zero show companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are boosting output.

Manufacturing across eastern Pennsylvania, southern New Jersey and Delaware expanded as well. The Federal Reserve Bank of Philadelphia’s general economic index increased to 5 this month from 3.6 in November, economists forecast before the 10 a.m. release.

The Standard & Poor’s Supercomposite Machinery Index has climbed 21 percent since Oct. 3, when it reached the lowest level in more than a year. That compares with a 10 percent gain in the broader S&P 500 Index in the same period.

The industry is not without risks. In addition to the European debt crisis, Fed officials after this week’s policy meeting said “business fixed investment appears to be increasing less rapidly.”

‘Expanding Moderately’

The central bank reaffirmed that “the economy has been expanding moderately” according to the Federal Open Market Committee’s statement on Dec. 13.

The policy makers also said “inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.”

Producer prices rose 0.2 percent in November after falling 0.3 percent the prior month, economists forecast a Labor Department report will show at 8:30 a.m.

At the same time, a report from the agency may show initial claims for unemployment insurance rose to 390,000 last week from 381,000 the prior week, which was the lowest since February, according to the median estimate in the Bloomberg survey.

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

Company News: ACAT 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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