Production in the U.S. unexpectedly dropped in September for the first time in more than a year, showing the industry that led the economy out of the recession is cooling.
Output at factories, mines and utilities fell 0.2 percent, the first decline since the recession ended in June 2009, figures from the Federal Reserve showed today. Factory production also decreased 0.2 percent, reflecting declines in consumer durable goods, like appliances and furniture.
The rebuilding of stockpiles, a component of the factory rebound last year, will probably cool following eight consecutive gains in inventories, a sign assembly lines will not accelerate much more. At the same time, improving demand from overseasand a pickup in business investment on new equipment may keep benefitting American manufacturers like Alcoa Inc., helping support the world’s largest economy.
“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.”
Confidence among U.S. homebuilders rose in October to the highest level in four months, a sign residential construction is stabilizing at depressed levels, a report from the National Association of Home Builders/Wells Fargo also showed today. The group’s confidence index increased to 16, exceeding the most optimistic forecast in a Bloomberg News survey, from 13 the prior month.
Stocks were rose, buoyed by earnings at Citigroup Inc. that exceeded analysts’ estimates as reserves for loan losses fell, and Treasuries securities also climbed. The Standard & Poor’s 500 Index increased 0.3 percent to 1,179.13 at 10:07 a.m. in New York. The yield on the benchmark 10-year note, which moves inversely to prices, fell to 2.52 percent from 2.56 percent late on Oct. 15.
Another report today showed global demand for U.S. stocks, bonds and other financial assets rose in August as investors bought Treasuries 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 Treasury Department.
Economists forecast production would increase 0.2 percent, according to the median of 63 projections in a Bloomberg News survey. Estimates ranged from a decrease of 0.3 percent to a gain of 0.4 percent. The drop followed an unrevised 0.2 percent gain in August.
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. The gauge 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.
Utility production fell 1.9 percent after a 1.4 percent decrease the prior month. Mining, which includes oil drilling, climbed 0.7 percent.
General Electric Co.’s Chief Executive Officer Jeffrey Immelt said there is “slow recovery in a few areas,” during a call with analysts last week after the world’s biggest producer of power-plant turbines reported third-quarter sales that missed analysts estimates. “The environment continues to get better.”
Made More Cars
Carmakers were among those seeing a pickup in the U.S. last month. 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.
Output of motor vehicles and parts rose 0.5 percent last month after falling 6.3 percent in August.
Foreign demand may help sustain growth. Exports rose 0.2 percent in August to $153.9 billion, the highest level in two years, Commerce Department figures showed last week. The gain was swamped by a 2.1 percent jump in imports that caused the trade deficit to widen 8.8 percent.
New York-based Alcoa, the largest U.S. aluminum producer, reported profit that beat analysts’ estimates and said sales abroad are climbing.
“In countries such as China, Brazil, India and Russia, more and more people are moving into the middle class, driving demand,” Chief Executive Officer Klaus Kleinfeld said in a statement on Oct. 7.
Today’s report also signaled business investment in new equipment was still growing. Production of technology equipment, including computers and semiconductors, rose 0.3 percent.
Reports last week suggested manufacturing will continue to support the recovery and that consumer spending in gaining speed.
The New York Fed’s October general economic index rose to the highest level in four months.Retail sales for September beat forecasts, prompting economists at Morgan Stanley in New York to boost their projection for third-quarter consumer spending.
In advance of the pickup in spending, businesses increased inventories in each of the first eight months of 2010, according to figures from the Commerce Department. Additional gains will probably be determined by the pace of household purchases.
Fed Chairman Ben S. Bernanke last week said he and his colleagues are considering ways they can stimulate the economy and that additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.