Production index signals a slow recovery
Production in the United States unexpectedly dropped in September for the first time in more than a year, Bloomberg reported.
Output at factories, mines and utilities fell 0.2 percent, the first decline since the recession ended in June 2009, according to figures released today by the Federal Reserve. Factory production also decreased 0.2 percent, reflecting declines in consumer durable goods such as appliances and furniture.
“It doesn’t mean we’ll see a lot more negative numbers, but the growth rates will be lower over the next few months,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York. “The inventory cycle is losing momentum, and the pickup in global growth has also started to slow down.”
Another report today showed global demand for U.S. stocks, bonds and other financial assets rose in August as investors bought U.S. Treasury securities in anticipation of monetary easing by the Federal Reserve. Net buying of long-term instruments totaled $128.7 billion in August compared with net buying of $61.2 billion in July, according to data from the U.S. Treasury Department.
Capacity utilization, which measures the amount of a plant that is in use, decreased to 74.7 percent last month from 74.8 percent in August. That gauge has averaged 80 percent over the past 20 years, showing there’s enough spare plant equipment and space to prevent bottlenecks that would lead prices higher.
The drop in factory output, the first since June, was led by a 0.4 percent decrease in consumer goods, which included a 0.9 percent fall in the production of durable products.
Carmakers were among those seeing improvement. Auto sales increased to a seasonally adjusted 11.8 million pace, the fastest since the federal government’s “cash for clunkers” incentive program last year.
Today’s report also signaled that business investment in new equipment was still growing. Production of technology equipment, including computers and semiconductors, rose 0.3 percent.