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Economic Watch: Industrial Production, Durable Goods Shipments and Orders Rise

Industrial production in the United States increased in September, posting its biggest gain in seven months. This follows a report Friday showing shipments of manufactured durable goods hit their highest level on record going back to 1992 -- but consumer confidence took a nosedive.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
October 28, 2013
Economic Watch: Industrial Production, Durable Goods Shipments and Orders Rise

 

3 min to read


Industrial production in the United States increased in September, posting its biggest gain in seven months. 

The 0.6% increase follows a 0.4% advance in August, according to the Federal Reserve.

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For the third quarter, this measure of the total output at the nation’s factories, mines and utilities, increased at an annual rate of 2.3%, more than double the second quarter pace of 1.1%.

Manufacturing output, which accounts for about three-quarters of industrial production, increased only 0.1% in September from the month before, following a 0.5% increase in August while mining output rose 0.2% in September and utility output increased 4.4% during the same time.

Lindsey Piegza, managing director and chief economist for the investment firm Sterne Agee, noted the August manufacturing output figure was downwardly revised from a first-reported 0.7%, that together with this latest figure, is “suggesting a cooling trend in activity.”

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Industrial capacity utilization rose to 78.3% in September from 77.9% in August, the highest rate since July 2008.

This follows a report Friday from the U.S. Commerce Department showing shipments of manufactured durable goods, up two consecutive months, increased 0.2% in September, hitting its highest level on record going back to 1992, and following a 0.8% increase in August. Excluding transportation shipments, the increase was 0.3%.

Likewise, new orders manufactured durable goods increased in September, picking up 3.7% from August, marking the fifth gain out of the last six months. Excluding transportation, new orders fell 0.1% during the period, due to a surge in civilian aircraft orders, while it increased 3.2% when defense orders are excluded.

“Business investment remains anemic with orders for large ticket items like machinery and equipment falling for the second time in three months,” said, Piegza. “Many headlines will be quick to draw a connection to the government shutdown, but it is clear the declining momentum in business spending was well in place ahead of the partial shutdown in Washington.”

Plegza said amid an environment of low, uneven demand, both domestically and internationally, and ample uncertainty on part of Washington, businesses have been sidelined and continue to remain hesitant to invest in structures or employees.

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“Going forward, without corporations willing to grow and hire, the recovery will remain stagnant,” she said. “The question remains, what will be the catalyst to spur growth in hiring? The answer is most likely a combination of pro-growth policies out of Washington incentivizing small businesses to hire, as well as continued improvement in the household balance sheet.”

Meantime, a third report, also released late last week, shows consumer confidence this month took a nosedive, hitting a 10-month low.

The Thomson Reuters/University of Michigan consumer sentiment index shows it hitting 73.2, after coming in at 77.5 in September.

“While this morning’s durable [goods] report was not affected by the government shutdown, the October consumer sentiment report surely was,” said Plezga. “The price tag for lost work and government services may have been minimal but the overall impact was much more widespread undermining consumers’ confidence and sowing uncertainty into the market.”

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