US industrial output declines despite upside surprise in manufacturing

Total industrial production fell 0.2% m/m in October, a bit less than the 0.3% m/m expected, as manufacturing output surprised to the upside on the month. Total manufacturing output rose 0.4% m/m in October (previous: -0.1%), against the forecast and consensus expectation of a 0.2% m/m rise. Durable goods manufacturing rose 0.5% m/m (previous: -0.3%), aided by a 0.7% monthly increase in motor vehicle and parts production.

Other areas of heavy manufacturing, including machinery (0.3% m/m, previous: 0.2%), primary metals (1.6% m/m, previous: -1.3%), and electrical equipment (1.8% m/m, previous: -1.6%), were modestly stronger than expected in October. Nondurable goods manufacturing grew 0.4% m/m (previous: 0.2%). Outside of the manufacturing sector, utilities output fell more sharply than we had expected (-2.5% m/m, previous: 1.2%), and mining declined in line with the forecast (-1.5% m/m, previous: -2.4%).

"The report suggests that select industrial sectors stabilized in October. Alongside encouraging signs of worker confidence in the September JOLTS data, we see modest upside risk to our baseline expectation for further sluggishness in the manufacturing sector", says Barclays.

"The sharper-than-expected decline in utilities output in October suggests less household utilities consumption on the month. This brought our tracking estimate of real consumption growth back to 2.8%, offsetting the one-tenth boost from this morning's CPI. After rounding, our Q4 GDP tracking estimate declined one-tenth, to 2.3%", added Barclays.