U.S. Factory Operating Rate at Highest Level in Two Years

Manufacturing production increased 0.3% in November

In a report released on Dec. 15 by the Federal Reserve, manufacturing production increased 0.3% in November.

The factory operating rate moved up to 72.8%, its highest level in more than two years but still well below its long-run (1972 to 2009) average of 79.2%.

Gains among durable goods were particularly broad-based; only the production of motor vehicles and parts decreased substantially. Excluding motor vehicles and parts, overall factory output advanced 0.7%. The output of mines edged lower, but the output of utilities moved up 1.9% as the return of more seasonal temperatures boosted the demand for heating.

Industrial production increased 0.4% in November after a decline of 0.2% in October.

The capacity utilization rate for total industry rose to 75.2%, a rate 5.4 percentage points below its average from 1972 to 2009.

"A large majority of manufacturing industries expanded in November. Fourteen of the 20 manufacturing industries posted growth, with the only major declines coming in textile and product mills, and motor vehicles and parts," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.

"The November industrial production report shows that the manufacturing sector is decelerating in its pace of growth, consistent with the pace of growth in the overall economy," he added. "Manufacturing production grew at a 9.4% annual rate in the second quarter of 2010 when GDP grew 2.5%, and manufacturing production increased at a 4.1% annual rate in the third quarter when overall GDP grew 2 percent. It now looks like manufacturing production and GDP will increase about 2.9% in the fourth quarter of 2010. The manufacturing recovery is widespread and progressing at a moderate rate."

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