manufacturing worker

US Factory Output Rebounds Even Without Post-GM Strike Bump

Dec. 17, 2019
The report adds to signs economic growth is holding up in the fourth quarter.

U.S. factory production rebounded by more than forecast in November and rose excluding a surge in auto production following the end of the General Motors Co. strike, in a sign of stabilization in manufacturing.

The 1.1% increase in manufacturing output, the biggest gain since early 2018, followed a 0.7% decrease in October, Federal Reserve data showed Tuesday, topping the median estimate of economists for a 0.8% gain. Production of motor vehicles and parts jumped 12.4%, the most in a decade; excluding that category, factory output rose 0.3%, the first gain in three months.

Total industrial production, which also includes mines and utilities, rose 1.1% after a 0.9% decrease.

Key Insights

The increase is welcome to manufacturers, who have faced headwinds throughout the year including persistent trade-policy uncertainty and slowing global demand. Even with the gain in November, though, factory output fell 0.8% from a year earlier, and figures were revised lower for September and October, indicating that activity remains relatively subdued.

This month’s proposed initial trade accord between the U.S. and China could bode well for output in 2020 if confidence improves. The Federal Reserve Bank of New York’s survey Monday showed the outlook for orders among manufacturers in the state advanced to its strongest since February. The Institute for Supply Management’s national factory index has signaled contraction for four months, however.

Other sectors that saw gains in the Fed data included information processing equipment, foods and tobacco and primary metals. Home electronics, clothing and chemicals posted declines.

The report adds to signs economic growth is holding up in the fourth quarter amid indications that consumer spending, the largest part of gross domestic product, will be softer than anticipated. A separate report earlier Tuesday showed construction of new U.S. homes increased more than forecast in November and permits to build climbed to a 12-year high.

Capacity utilization, measuring the amount of a plant that is in use, rebounded to 77.3% from 76.6%.

Utility production rose 2.9% after falling 2.4% the prior month, as below-average November temperatures in much of the country supported demand. Mining production fell 0.2%, with oil and gas well drilling declining 3.9%.

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.

By Reade Pickert, with assistance from Chris Middleton

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