U.S. industrial production fell in the month of October. On a sequential basis, the overall industrial production dropped 0.8 percent after an upwardly revised 0.3 percent fall in the prior month. The decline in October was larger than consensus expectations of a fall of 0.4 percent. As anticipated, a good portion of October’s fall was driven by the sidelining of factories in the GM strike that ended late in the month, noted Barclays in a research report.
Overall, manufacturing production dropped 0.6 percent sequentially after a 0.5 percent fall in October. Striping motor vehicles, manufacturing dropped 0.1 percent sequentially for a second-consecutive month, led by lingering softness in several categories that are especially exposed to foreign competition.
Falls in non-manufacturing industries also added to October’s fall in overall industrial production in the utilities category dropped 2.6 percent sequentially after a 1.9 percent rise in the prior month, as temperatures swung from unusually warm to unusually cold in much of the country. The softness in utilities would possibly also be a drag on consumer spending in the fourth quarter 2019, through the NIPA estimates of energy services. In the meantime, mining production came in softer than indicators had implied, falling 0.7 percent on the heels of a seminal fall in September.
October’s fall, which was third in this category in the last four months, indicates that the weakening of oil prices since last spring continues to be a drag on domestic energy production. Taken together, the falls in these two categories subtracted around 0.2 percentage points from the stronger-than-expected October fall in top-line IP.
Today’s data imply that the constellation of negative influences that have been weighing on domestic manufacturing activity in 2019 have persisted into the fourth quarter, noted Barclays in a research report.
“Even if an interim trade deal between the US and China materializes, as we expect, these adverse fundamentals will likely weigh on demand for domestic manufactured goods -- and on demand for domestically produced oil -- in the coming months. On a more encouraging note, we do see tentative signs in the recent data that downward momentum in manufacturing has slowed, consistent with a diminishing drag from this sector on overall activity”, added Barclays.
