BLBG: Industrial Production in U.S. Probably Increased in October
Industrial production probably rose in October, rebounding from the first decrease in more than a year and signaling manufacturing continues to support the U.S. economic recovery, economists said before a report today.
Output at factories, mines and utilities increased 0.3 percent after a 0.2 percent drop in September, the first decline since the recession ended in June 2009, according to the median forecast of 78 economists surveyed by Bloomberg News. Other data may show wholesale prices jumped last month on rising fuel costs, while builders turned less pessimistic in November.
Gains in exports and business investment may keep assembly lines churning, just as the initial spark from the need to rebuild inventories wanes. The increases in global demand that benefitted companies like General Electric Co. and helped lift the economy gave American consumers time to repair finances and resume spending, leading to a more balanced recovery.
“We’re slowly gaining momentum,” said Aaron Smith, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The deceleration for manufacturing probably really has run its course. Consumers are slowly ramping up.”
The Federal Reserve’s production report is scheduled for 9:15 a.m. in Washington. Economists’ estimates ranged from no change to an increase of 0.7 percent.
Producer prices rose 0.8 percent in October, the biggest advance since March, according to the median estimate of economists surveyed before a Labor Department release at 8:30 a.m. Core prices, which exclude food and fuel, may have climbed 0.1 percent for a third month.
Pessimism Abates
The National Association of Home Builders/Wells Fargo confidence index climbed to 17 this month from 16 in October, according to the median forecast in a Bloomberg survey. The figures are slated for 10 a.m. and readings less than 50 mean more respondents said conditions are poor than good.
Previous reports pointed to an October rebound in manufacturing, which makes up 11 percent of the U.S. economy.
The Institute for Supply Management’s factory gauge rose in October to the highest level in five months, reflecting acceleration in orders and production. Factories also boosted the workweek by 0.2 percent last month, enough to overcome a 7,000 drop in payrolls, figures from the Labor Department showed.
The first of this month’s regional factory reports raised the risk that the rebound will prove to be short-lived. Manufacturing in the region covered by the Fed Bank of New York unexpectedly contracted in November for the first time in more than a year, the branch of the central bank said yesterday.
Fed Concerns
Some Fed policy makers are concerned economic growth is not strong enough to reduce an unemployment rate close to 10 percent. At the same time, inflation remains below the Fed’s longer-term projections. The central bank this month announced a program to buy an additional $600 billion in Treasury securities in a bid to keep borrowing costs low and spur growth.
Shares rallied last month in anticipation of the Fed’s action and as the economy showed signs of strengthening. The Standard & Poor’s 500 index rose 3.7 percent in October after an 8.8 percent gain the prior month, the best back-to-back performance in more than a year. The S&P Supercomposite Machinery Index rose 3.2 percent last month and 17 percent in September, the biggest one-month gain since April 2009.
Foreign sales remain a bright spot. Exports in September rose to the highest level in two years, according to Commerce Department data released Nov. 10.
General Electric Chief Executive Officer Jeffrey Immelt last week appointed Vice Chairman John Rice to accelerate a push to bolster exports and expand partnerships in countries like China and India that are modernizing infrastructure to foster faster economic growth.
Investment Pickup
“The growth in the next decade or decades that’s going to take place will be quite robust in places like China and India,” Immelt said Nov. 9 in Beijing. GE is based in Fairfield, Connecticut.
Some businesses are also responding to increased exports and to a pickup in U.S. demand by replacing aging equipment and bringing more parts of their plants online.
Rockwell Automation Inc., the maker of factory software, said it sees interest rising in large-scale plant projects for full-production lines in developed markets, a sign that those economies may be picking up steam.
“These are projects that are significant expansion in production capacity or new lines,” Chief Executive Officer Keith Nosbusch said in an interview last week. “These would be larger capital spending investments,” which means those markets have a more positive outlook on their future.
