There were two important reports on the U.S. economy released this morning. First, data from the Federal Reserve Board of Governors showed that overall industrial activity in America improved slightly last month, with total production rising by 0.1 percent. That was a smaller rebound than anticipated from August's (worse than previously estimated) -0.5 percent decline. Under the hood, though, most production measures firmed last month, with September’s gain being hurt mainly by a sharp 1.0 percent drop in utilities related to cooler temperatures that reduced A/C usage. However, industrial production on a year-over-year basis fell 1.0 percent in September, the 13th month in a row of annual declines and a pattern rarely seen outside of a recession. Elsewhere in the report, manufacturing, which makes up roughly 75 percent of all industrial production, lifted by 0.2 percent last month, and capacity utilization, sometimes used as a leading indicator of inflation and potential output, rose to 75.4 percent, albeit up from a downward-revised August print and still well below the long-term average.
Elsewhere, a report from the Federal Reserve Bank of New York showed that manufacturing activity in the Northeast region of the country slowed significantly this month, with the general business conditions index falling to -6.8 in October. That was much worse than economists had expected, the third sub-zero (contractionary) print in a row, and the weakest headline reading since May. Under the hood, measures of new orders, shipments, total employment, and the average employee workweek improved this month but all of these gauges remained in negative territory. However, surveyed managers’ outlooks for both business conditions and capital expenditure plans six months from now improved in October, supporting the argument that uncertainty surrounding the Presidential election is still a major drag on current activity.
Sources: Econoday, Twitter, Bloomberg, ZH, FRBG, FRBNY, FRBSLPost author: Charles Couch