Factory slowdown shows U.S. has little traction

Global Manufacturing

Manufacturing in Europe is also having trouble strengthening. An index of factory output in the euro area increased to 51.3 in October from 51.1 a month earlier and 51.4 in August, according to London-based Markit Economics.

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%.

Today’s Fed report also showed that factory capacity utilization, which measures the amount of a plant that is in use, held at 76.1%. In February, it reached an almost five-year high of 76.5%.

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.

Warmer September

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. The agency’s index on residential energy demand showed 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.

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.

Vehicle Production

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.

Ford Motor Co. (F) 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.

‘Gradually Improving’

Cutler said the economy is “gradually improving” while not “rocketing back” in the U.S. He forecast an increase in demand in the company’s 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.

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