US manufacturing production increases
WASHINGTON: US manufacturing output rose for a fifth straight month in October, shrugging off a sharp drop in motor vehicle production and suggesting underlying strength in factory activity despite growing headwinds that are expected to slow the sector in 2019.
The Federal Reserve said manufacturing production rose 0.3 per cent last month. Data for September was revised up to show output at factories increasing 0.3 per cent instead of advancing 0.2 per cent as previously reported.
Economists had forecast manufacturing output rising 0.2 per cent in October. Manufacturing, which accounts for more than 12 per cent of the economy, is expected to slow down next year in part as the stimulus from the Trump’s administration’s $1.5 trillion tax cut package fades.
Manufacturing surveys have suggested a moderation in factory activity amid labour shortages as well as more expensive raw materials caused by the White House’s protectionist trade policy.
A strong dollar, which has gained about 8.1 per cent this year against the currencies of the United States’ main trade partners, is also hurting exports, and there are signs of slowing growth in other economies, including that of China.
“The manufacturing sector is still coping fairly well with the dollar’s recent appreciation and the slowdown in global growth,” said Andrew Hunter, a US economist at Capital Economics in London.
“But the recent weakening in the global manufacturing PMIS, particularly in China, suggests that the current strength of the factory sector is unlikely to be sustained,” Hunter said, referring to managers’ indexes.
US financial markets were little moved by the data, with traders focused on worries about a slowing global economy. The dollar fell against a basket of currencies, while US Treasury prices rose. Stocks on Wall Street were trading lower.
Motor vehicle production slumped 2.8 per cent in October after rising 1.3 per cent in September. Economists blamed the drop on US tariffs on imported steel and aluminium, and warned of further harm to production if the duties were not scrapped.
“While automakers have successfully countered industry headwinds, such as tighter bank lending for autos, US import tariffs on steel and aluminium continue to pose downside risks amid latecycle demand fatigue,” said Stephen Ciccarella, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.
Excluding motor vehicles and parts, manufacturing gained a solid 0.5 per cent last month, boosted by a strong increase in the output of business equipment. That followed a 0.2 per cent rise in September.
Business equipment production increased 0.8 per cent, matching September’s rise. The strong gains suggest a pickup in business spending on equipment in the fourth quarter after it stalled in the July-september period.
October’s rise in manufacturing production offset decreases in mining and utilities output, leading to a 0.1 per cent gain in industrial production last month. Industrial output rose 0.2 per cent in September.
Surveys have suggested a moderation in factory activity amid labour shortages as well as more expensive raw materials caused by the White House’s protectionist trade policy.