Issue: Dec 2010


Industrial Production - November 2010



U.S. production moves up solidly in November; Manufacturing clocks a second consecutive increase of 0.3%

by Brian Bethune, Chief U.S. Financial Economist, IHS

Bottom Line

Industrial production bounced back up by 0.4% in November.

Manufacturing clocked a second consecutive increase of 0.3% - strong gains in machinery, computers, primary metals, wood products, and aerospace more than offset a fairly sharp drop in auto production.

Output of construction supplies soared by 0.9%, after edging up by 0.1% in October.

Utilities output jumped by 1.9%.

Overall manufacturing output is on track to advance at a moderate rate in the fourth quarter.

Manufacturing capacity utilization moved up by 0.2 of a percentage point to 72.8% - but there is still massive excess capacity in the economy.

Outlook

The U.S. industrial sector rebounded solidly in November, as manufacturing, construction and utilities all posted gains.

Within manufacturing, strong gains in machinery, computers, primary metals, wood products, and aerospace more than offset a fairly sharp drop in auto production.

Construction supplies output jumped by 0.9%, and that follows a slight gain of 0.1% in October. This recent strength, however, seems out of line with downbeat reports from the housing and private commercial construction sectors.

Utilities output jumped by 1.9%, but that follows three consecutive months of declines.

Manufacturing is on track to report a very solid gain in the fourth quarter. However, the growth of output overall is still moderate and capacity utilization remains extremely depressed.

Overall output is not yet strong enough yet to yield a significant improvement in employment growth or a meaningful reduction in the unemployment rate.

Hence, the Fed will continue to keep the pedal to the metal on monetary policy.

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