http://www.businessweek.com/news/2012-11-16/industrial-production-in-u-dot-s-dot-probably-expanded-at-slower-pace

Bloomberg News

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

November 16, 2012

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

American manufacturers, a source of strength for much of the three-year expansion, face a persistent challenge from Europe’s recession and slower growth in Asia. Photographer: Ty Wright/Bloomberg

Industrial production in the U.S. probably cooled in October as superstorm Sandy knocked out power for utility customers in the Northeast, economists said before a report today.

Output at manufacturers, mines and utilities rose 0.2 percent after a 0.4 percent increase in September, according to the median projection of 84 economists surveyed by Bloomberg before the Federal Reserve’s report. Production at factories may have also climbed 0.2 percent.

American manufacturers, a source of strength for much of the three-year expansion, face a persistent challenge from Europe’s recession and slower growth in Asia. A further cutback in capital spending by companies concerned about the possibility of $607 billion in automatic tax increases and spending cuts next year represents another hurdle for the industry.

“Manufacturing is soft,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut, whose forecast matched the median. “The economy’s moving along at a pace that’s generally disappointing.”

The Fed releases the production data at 9:15 a.m. in Washington. Estimates in the Bloomberg survey ranged from a 0.3 percent decrease to a 0.6 percent gain. Manufacturing, about 12 percent of the U.S. economy, accounts for 75 percent of total industrial production.

Sandy, which swept ashore in the last week of October, killed more than 100 people in the U.S., disrupted rail and subway service, left more than 8 million homes and businesses without power.

Power Outages

Outages caused by the storm along with “lost manufacturing output” will weigh on the data, said Carl Riccadonna, senior U.S. economist at Deutsche Bank Securities Inc. in New York, who projected a 0.1 percent drop.

A pair of regional factory reports yesterday showed the effects of Sandy extended into November. The Federal Reserve Bank of New York’s general economic index was minus 5.2 this month after minus 6.2 in October. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut. The Philadelphia Fed’s economic index, which covers eastern Pennsylvania, southern New Jersey and Delaware, decreased to minus 10.7 in November from 5.7 a month earlier.

Shares of manufacturers may be underperforming as a result. The Standard & Poor’s Supercomposite Machinery Index has fallen 8.5 percent since March 30. That compares with a 3.9 percent drop in the broader S&P 500 Index in the same period.

Business Investment

W.W. Grainger Inc., a Lake Forest, Illinois-based supplier of tools and equipment, is among companies that are finding more restraint in corporate investment as the U.S. gets closer to the so-called fiscal cliff. Without resolution from lawmakers before year-end, taxes will increase and spending cuts will occur in 2013, threatening the economy with a recession.

“The volume on the fiscal cliff has absolutely notched up over the last several months,” James T. Ryan, president and chief executive officer at W.W. Grainger, said on a Nov. 14 conference call with analysts. “We’re not seeing anyone that’s stepping out and taking big chances with large projects or capital investments.”

At the same time, auto manufacturing has been a bright spot in the industry as purchases picked up. Autos in October sold at a 14.22 million annual rate after climbing to 14.88 million in September, the strongest since March 2008, according to data from Ward’s Automotive Group.

John Ryding, chief economist at RDQ Economics in New York, said the outlook for manufacturing hinges on whether the U.S. will avoid the fiscal cliff.

“The answer to that going forward is going to be found in the fiscal cliff talks,” Ryding said. “If they go badly and we have tax increases, then manufacturing is going to do quite poorly in 2013.”

                  Bloomberg Survey

============================================
                              Ind.     Cap.
                             Prod.    Util.
                              MOM%        %
============================================

Date of Release              11/16    11/16
Observation Period            Oct.     Oct.
-------------------------------------------
Median                        0.2%    78.3%
Average                       0.1%    78.3%
High Forecast                 0.6%    78.6%
Low Forecast                 -0.3%    77.9%
Number of Participants          84       68
Previous                      0.4%    78.3%
-------------------------------------------
4CAST                         0.4%    78.5%
Acciones y Valores            0.2%     ---
Action Economics              0.1%    78.2%
Aletti Gestielle              0.2%    78.2%
Ameriprise Financial         -0.1%    78.3%
Banca Aletti                  0.2%    78.5%
Bank of the West              0.1%    78.3%
Bank of Tokyo-Mitsubishi      0.2%     ---
Banorte-IXE                  -0.2%     ---
Barclays                      0.0%    78.3%
Bayerische Landesbank         0.3%     ---
BBVA                          0.2%    78.4%
BMO Capital Markets          -0.1%    78.1%
BNP Paribas                   0.0%    78.2%
BofA Merrill Lynch            0.2%    78.3%
Briefing.com                  0.0%    78.3%
Capital Economics             0.0%    78.5%
CIBC World Markets           -0.3%    78.1%
Citi                          0.2%    78.4%
ClearView Economics           0.2%    78.4%
Commerzbank AG                0.0%    78.2%
Credit Agricole CIB           0.4%    78.3%
Credit Suisse                 0.1%    78.3%
Danske Bank A/S               0.2%     ---
DekaBank                      0.2%    78.3%
Desjardins Group             -0.2%    78.0%
Deutsche Bank Securities     -0.1%    78.2%
Deutsche Postbank AG          0.2%     ---
Exane                         0.4%     ---
First Trust Advisors          0.1%    78.3%
FTN Financial                 0.0%    78.3%
Goldman, Sachs & Co.          0.2%    78.3%
Hammer Partners SA            0.2%    78.4%
Helaba                        0.2%    78.4%
High Frequency Economics      0.3%    78.4%
HSBC Markets                 -0.1%    78.1%
Hugh Johnson Advisors         0.2%    78.4%
IDEAglobal                    0.3%    78.6%
IHS Global Insight            0.2%    78.3%
Informa Global Markets        0.1%    78.3%
ING Financial Markets         0.1%    78.3%
Insight Economics             0.1%    78.2%
Intesa Sanpaulo              -0.1%     ---
J.P. Morgan Chase             0.4%    78.5%
Janney Montgomery Scott       0.4%    78.4%
Jefferies & Co.               0.0%    78.3%
John Hancock Financial        0.3%    78.2%
Landesbank Berlin             0.0%    78.2%
Landesbank BW                 0.1%    78.2%
Lloyds Bank                   0.1%     ---
Maria Fiorini Ramirez         0.0%    78.2%
Market Securities            -0.1%     ---
MET Capital Advisors          0.6%     ---
Moody’s Analytics             0.3%    78.4%
Morgan Stanley & Co.         -0.1%    78.1%
National Bank Financial       0.3%    78.3%
Natixis                       0.2%    78.4%
Nomura Securities             0.3%    78.5%
Nord/LB                       0.1%    78.3%
OSK Group/DMG                 0.1%     ---
Oxford Economics              0.6%    78.6%
Pierpont Securities          -0.1%    78.1%
PNC Bank                      0.1%    78.2%
Prestige Economics            0.1%     ---
Raiffeisenbank International -0.2%    77.9%
Raymond James                 0.2%    78.4%
RBC Capital Markets           0.2%    78.4%
RBS Securities                0.2%    78.3%
Regions Financial             0.3%    78.5%
Renaissance Macro Research    0.0%    78.1%
Scotiabank                    0.2%     ---
SMBC Nikko Securities         0.2%    78.3%
Societe Generale              0.2%    78.3%
Southern Polytechnic State    0.0%     ---
Standard Chartered            0.2%    78.3%
Stone & McCarthy              0.2%    78.3%
TD Securities                 0.1%    78.4%
UBS                           0.1%    78.2%
UniCredit Research            0.2%    78.3%
Union Investment              0.4%    78.5%
University of Maryland        0.2%    78.4%
Wells Fargo & Co.            -0.1%    78.2%
Westpac Banking Co.          -0.1%     ---
Wrightson ICAP                0.4%    78.5%
============================================

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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


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