The Federal Reserve Board reported that industrial production rose 0.7 percent in October, beating expectations and reversing the 0.1 percent decline in September. For the manufacturing sector, production rose 0.5 percent, its fourth straight monthly increase. Year-over-year growth in manufacturing production is up 4.1 percent.
Meanwhile, manufacturers’ capacity utilization increased 0.1 percent, or 0.7 percent since October 2010.
In terms of manufacturing production, eleven sectors experienced gains, with eight having declines. Durable and nondurable goods production were up 0.8 percent and 0.2 percent, respectively. The sectors with the greatest increases were: motor vehicles and parts (up 3.1 percent), apparel and leather (up 2.8 percent), aerospace and miscellaneous transportation (up 2.1 percent) and electrical equipment and appliances (up 2 percent).
Today’s report shows that manufacturing activity has picked up the pace from weaknesses seen in recent months. This is especially true in the durable goods sector, but nondurable goods industries are also doing better. Given that the consensus forecasts for industrial production had been in the 0.3 to 0.4 percent range, the strength of this growth is particularly heartening.
Manufacturers continue to respond to surveys suggesting high expectations for growth in new orders, production, employment and capital spending over the next six months. The survey from the New York Federal Reserve Bank yesterday was consistent with this, even as its measures of current production suggested a still-weak environment.
Moving forward, I would anticipate continued recovery in the manufacturing sector, with businesses closely following economic and political developments both here and abroad. The economic recovery – particularly for manufacturers – is still a fragile one that could be offset by economic challenges.
Chad Moutray is chief economist, National Association of Manufacturers.