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US Factory Output Declines by Most Since April on GM Strike

The ripples of the GM auto worker's strike, which ended late October, continues to affect manufacturing output numbers.

U.S. manufacturing output slumped in October by the most in six months as an auto workers' strike at General Motors Co. curtailed vehicle production and the trade war continued to weigh on other factories.

The 0.6% decline in output followed a 0.5% decrease the previous month, Federal Reserve data showed Friday. Excluding the 7.1% drop in motor vehicle output, which was the largest since January, factory production decreased a more modest 0.1% for a second month.

Total industrial production, which also includes output at mines and utilities, slumped 0.8% in October, the largest setback since May 2018.

Key Insights

  • The data are consistent with other reports showing cracks in the factory sector as producers grapple with sluggish global demand, slower business investment and the U.S.-China trade war. The Institute for Supply Management's gauge contracted three straight months, while a separate index showed global manufacturing shrank in October for a sixth month.
  • All major market groups, including consumer goods and business equipment, reported declines in output for at least a second month.
  • Factory production may rebound next month as the striking United Auto Workers reached an agreement with GM late in October. Overall the strike cost the company nearly $3 billion and lasted 40 days.
  • Aside from the slump in automaker output, production also retreated at makers of computers, electrical equipment, chemicals, apparel and fabricated metals.

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  • The median forecast of economists in the Bloomberg survey for manufacturing output called for a 0.7% decline.
  • Of the three main industrial production groups, mining dropped for a second month on weakness in the oil patch, while utilities registered the sharpest drop since June.
  • Capacity utilization, measuring the amount of a plant that is in use, fell to 76.7% from 77.5%. Capacity utilization at manufacturers decreased to 74.7%, the weakest since September 2017.
  • The Fed's monthly data are volatile and often get revised. Manufacturing, which makes up about three-fourths of total industrial production, accounts for about 11% of the U.S. economy.
TAGS: Supply Chain
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