Industrial Production Increases For Third Consecutive Month In September

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Industrial production increased for the third consecutive month in September, according to a report released by the Federal Reserve on Friday, with the pace of growth for the month coming in well above analyst estimates.

The report showed that industrial production increased by 0.7 percent in September following an upwardly revised 1.2 percent increase in August and a 0.9 percent increase in July.

Economists had been expecting a much more modest increase of about 0.2 percent compared to the 0.8 percent growth originally reported for the previous month.

Commerzbank analyst Christoph Balz said, "The third consecutive monthly increase confirms that the U.S. industrial sector is on the mend."

A continued increase in auto production contributed to the stronger than expected growth, with the production of motor vehicles and parts increasing by 8.1 percent in September, as auto makers looked to fill depleted inventories following the success of the cash for clunkers program.

The strength in the auto sector contributed to a 0.9 percent increase in manufacturing production in September, which followed 1.2 percent increases in each of the two previous months. Excluding motor vehicles and parts, manufacturing production still rose 0.5 percent.

While mining output also increased by 0.7 percent in September following a 1.1 percent increase in August, utilities output fell by 0.7 percent after rising 1.9 percent in the previous month due to lower electricity output.

Peter Boockvar, equity strategist for Miller Tabak, said, "Manufacturing will be a key factor contributing to the 2nd half recovery and the inventory rebuilding is happening mostly in vehicles, mining (helped by rising commodity prices) and computer/electronics."

"The sustainability will of course be determined by the pace of final demand," Boockvar added.

The report also showed that the capacity utilization rate rose to 70.5 percent in September from a revised 69.9 percent in August. Economists had expected the capacity utilization rate to edge up to 69.8 percent from the 69.6 percent originally reported for the previous month.

Despite the bigger than expected increase, the Federal Reserve noted that the capacity utilization rate is 10.4 percentage points below its average for 1972 through 2008.

The increase in the capacity utilization rate reflected higher capacity utilization in the manufacturing and mining industries, which more than offset a drop in capacity utilization in the utilities industry.

Industrial production increased for the third consecutive month in September, according to a report released by the Federal Reserve on Friday, with the pace of growth for the month coming in well above analyst estimates. The report showed that industrial production increased by 0.7 percent in September following an upwardly revised 1.2 percent increase in August and a 0.9 percent increase in July. Economists had been expecting a much more modest increase of about 0.2 percent. (Market News Provided by RTTNews)