Industrial production in U.S. increases 1.1%, most in a year

Auto Sales

Gains at General Motors Co. and Chrysler Group LLC last month led to a pickup in the industry’s monthly sales rate. Motor vehicles sold at a 16.3 million annual rate, the fastest since May 2007, according to Ward’s Automotive Group.

At the same time, faster production has left automakers with more unsold vehicles. Inventory climbed to almost 3.4 million cars and light trucks entering November, according to industry data provider Wards. At 76 days’ supply, that was the highest for the month since 2005.

Ford Motor Co.’s inventory swelled to 89 days, prompting the Dearborn, Michigan-based company to forecast that its North American production will drop 1.8% in next year’s first quarter to 770,000. Its fourth-quarter output of 770,000 was unchanged, according to a statement.

DuPont Benefiting

Stronger auto sales have benefited other companies, such as DuPont Co., the biggest U.S. chemicals maker by market value. DuPont expects global growth in the 3% range next year, while industrial production should increase by 4% as Europe and Japan recover from recessions.

“When you look at the automotive segment and the increases that are going to go on there, obviously, that would impact positively our performance polymers business,” Chief Financial Officer Nicholas Fanandakis, said Dec. 10 at the Bank of America Merrill Lynch US Basic Materials Conference.

Today’s Fed report also showed capacity utilization, which measures the amount of a factory that is in use, rose to 79% in November, the highest since June 2008, from 78.2% the month before.

Factory output of non-durable goods rose 0.5%, reflecting gains in textiles, petroleum and chemicals. Consumer goods production rose 1.5%, led by gains in home electronics, appliances and furniture.

Business Equipment

Production of business equipment declined 0.5% after a 0.2% gain. Output of construction supplies rose 0.6% for a second month.

A regional report earlier today showed factory activity in the New York region expanded less than forecast in December. The Federal Reserve Bank of New York’s general economic index rose to 1% this month from a November reading of minus 2.2. Readings greater than zero signal expansion in the index, which covers New York, northern New Jersey and southern Connecticut.

The outlook for production depends on whether demand is strong enough to keep pace with an increase in stockpiles. A report last week showed business inventories climbed 0.7% in October, the biggest jump since January.

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