Factory production in the U.S. rose less than forecast in September, indicating a pause in manufacturing leading into the budget battle that partially closed the federal government.
Output at factories rose 0.1% after a revised 0.5% gain in August that was smaller than initially estimated, figures from the Federal Reserve showed today in Washington. The median forecast of economists in a Bloomberg survey called for a 0.3% September gain. Total industrial production, which also includes output by mines and utilities, advanced 0.6% as higher temperatures drove up electricity use.
The figures showed declines in production of such non- durable goods as chemicals and textiles, while output of autos and business equipment rose. An acceleration in manufacturing, which accounts for about 12% of the economy, depends on whether corporate confidence improves in wake of the partial government shutdown that lasted for half of October.
“We are in a kind of status-quo, muddle-along mode,” Eric Green, global head of foreign exchange and rates at TD Securities USA LLC in New York, said before the report. “You’ve also had a bit of a hiccup here in terms of business confidence” because of the budget battle in Washington, he said.
Stock-index futures were little changed after the figures, with the contract on the Standard & Poor’s 500 Index expiring in December falling less than 0.1% to 1,753.3 at 9:19 a.m. in New York.
The median forecast in a Bloomberg survey of 85 economists called for a 0.4% advance in September industrial production. Estimates ranged from a drop of 0.3% to an increase of 0.8%. Manufacturing, which accounts for about 75% of total production, was previously reported as rising 0.7% in August.
Factory production in China has shown signs of picking up. Industrial output in September climbed 10.2% from the same month last year, according to Oct. 18 figures from the Beijing-based National Bureau of Statistics. In June, the year- over-year increase was 8.9%.
In the euro area, the pace of manufacturing growth has been more limited. An index of factory output in the region increased to 51.3 in October from 51.1 a month earlier and 51.4 in August, according to London-based Markit Economics.
Today’s Fed report also showed that capacity utilization, which measures the amount of a plant that is in use, climbed to 78.3% from 77.9% the prior month.
Mining production, which includes oil drilling, rose 0.2% after a 0.6% gain. Utility output jumped 4.4%, the most since March, after falling for five straight months.
The average temperature last month was 67.3 degrees Fahrenheit (19.6 Celsius), making it the sixth-warmest September on record, according to the National Oceanic and Atmospheric Administration. According to the agency’s index on residential energy demand, September was 9% above average.
Factory production of non-durable goods declined 0.3% in September, the third straight decrease. Output of textiles dropped 0.7%, while production of chemicals fell 0.6%.
Dow Chemical Co., the largest U.S. chemical maker by revenue, this month reported profit that trailed analysts’ estimates amid higher costs and lower sales in the unit that makes epoxy, used in plywood and can linings.
Production of motor vehicles and parts climbed 2% after a rising 5.2% a month earlier, today’s report showed. Automaker assemblies rose to an 11.55 million annualized rate in September, the most since June 2006. Manufacturing excluding autos and parts was unchanged following a 0.2% gain a month earlier.
Demand for motor vehicles has been a bright spot for manufacturers, with cars and light trucks selling at a 15.2 million annualized rate in September after climbing in August at the fastest pace since 2007, figures from Ward’s Automotive Group showed.
Ford Motor Co. earned a $2.3 billion profit in North America in the third quarter and raised its forecasts for pretax profit and operating margin for the full year. The Dearborn, Michigan-based company said last week that its automotive sales rose 12% to $33.9 billion. It also earned a rare profit on overseas operations on rising demand for Focus compact cars in China and B-Max vans in Europe.
Eaton Corp., which makes electrical equipment for buildings and hydraulics for machinery, is seeing steady, albeit slow, improvement in the U.S. economy, Chief Executive Officer Sandy Cutler said during an Oct. 25 conference call. The U.S. accounted for about half of Eaton’s revenue in 2012.
“As we see some of the activity we’re seeing now, and I think the whole backdrop to this is this is a gradually improving economy,” Cutler said. “It’s not one that’s rocketing back here in the U.S.”
Cutler forecast an increase in demand in its markets of as much as 4% next year, spurred by economic recovery in Europe.
“The biggest turnaround in a region is likely be Europe,” Cutler said in an Oct. 25 telephone interview. “Whether you think growth’s a half-point positive or a point positive, it’s sure going to be better than negative 1% for a couple of years in a row.”
A recovery in the company’s orders in the third quarter has marked a “change in momentum,” Cutler said. Eaton, which is based in Dublin and operates from Cleveland, is forecasting zero growth for its markets this year, he said.