- Scott Brown, chief economist at Raymond James & Associates Inc
Industrial production in the world's largest economy unexpectedly fell in October, dragged down by drops at utilities, mines and automakers, signalling manufacturing began the final quarter of the year on a soft footing. Output fell 0.1% after a 0.8% rise in September, and compared with analysts' forecast for a 0.2% gain. An increase in manufacturing is needed to help support the expansion, as global economic growth from Europe and Japan to emerging markets cools. Strengthening consumer confidence and the decline in gasoline prices are brightening the outlook for holiday sales, indicating factories will get a boost in the next few months.
U.S. manufacturing output, which makes up 75% of total production, rose in October, but a third consecutive month of drops in motor vehicle production suggested some slowdown in the pace of factory activity. Factory production grew 0.2% last month after a downwardly revised 0.2% rise in September, according to the Federal Reserve. Capacity utilization, which measures the amount of a factory that is in use, declined to 78.9% in October from 79.2% the month before. The economy may grow at a 2.6% pace in the fourth quarter after expanding 3.5% in the three months ended September, analysts project. Gains in business and consumer spending will be needed to sustain momentum heading into the new year.
© Dukascopy Bank SA