WASHINGTON (Reuters) – US manufacturing production UU. It climbed a fifth consecutive month in October, a sharp decline in the production of motor vehicles sharpened and suggests an underlying force in factory activity despite rising winds expected to decrease the sector in 2019.
DATA SHEET – Assembly workers work at the bottom of the Ford Mustang 2015 vehicles at the Ford Motor Flat Rock Assembly plant production line in Flat Rock, Michigan, on August 20, 2015. REUTERS / Rebecca Cook
The Federal Reserve said Friday's production production increased 0.3 percent last month. September data was revised to show factory output by 0.3 percent instead of 0.2 percent as reported earlier.
Economists surveyed by Reuters expected production production to increase by 0.2 percent in October. Production, which accounts for more than 12 percent of the economy, will have to decline next year partly because the stimulus of the Trump Administration truncation package of 1.5 trillion dollars disappears.
Manufacturing surveys have suggested a moderation in the manufacturing activity between the shortage of employment and the most expensive raw materials caused by the protectionist commercial policy of the White House.
A strong dollar, which gained about 8.1 percent this year against the currencies of major US trading partners, is also experiencing exports and there are signs that the growth of the economies is diminishing, among others, China.
"The manufacturing sector is still dealing quite well with the recent appreciation of the dollar and the slowdown in global growth," said Andrew Hunter, a US economist at Capital Economics in London.
"But the recent weakening in the global manufacturing PMI, particularly in China, suggests that the current strength of the manufacturing sector is unlikely to be sustained," said Hunter, referring to the indices of the purchasing managers.
US financial markets were little moved by data, with traders focused on concerns about a slowdown in the global economy. The .DXY dollar fell against a basket of currencies, while the prices of the Treasury of the United States rose. Wall Street shares were trading lower.
SUPPORT OF AUTO PRODUCTION
Production of motor vehicles fell 2.8 percent in October after rising 1.3 percent in September. Economists accused the fall of US tariffs on imported steel and aluminum and warned that there would be more damage to production if the rights were not discarded.
"While car manufacturers have successfully counteracted direct winds in the industry, such as stronger auto loans, US import tariffs on steel and aluminum continue to pose negative risks in the midst of late-cycle demand fatigue "said Stephen Ciccarella, senior economist at Moody's Analytics in West Chester, Pennsylvania.
Excluding vehicles and automobile parts, production gained a solid 0.5 percent last month, driven by a sharp increase in the production of commercial equipment. This followed an increase of 0.2 percent in September.
Production of business equipment increased by 0.8 percent, increasing September growth. The strong profits suggest a recovery in the commercial expenses in the equipment in the fourth quarter after stagnating in the period from July to September.
The increase in production production in October decreased in the production of mining and public services, which led to an increase of 0.1 percent in industrial production last month. Industrial production rose 0.2 percent in September.
The Fed said that hurricanes Florence and Michael have reduced the level of industrial production in September and October, but the effects of storms "seem to be less than 0.1 percent per month."
Mining production dropped 0.3 percent in October after falling 0.1 percent in September. Petroleum and gas drilling rose 1.6 percent after declining for three consecutive months. With the fall in oil prices in a minimum of eight months on Tuesday, economists expect the mining production to remain weak.
"Given the weak decline in oil prices since the beginning of October, these declines in mining activity will probably accumulate momentum in the coming months," said Jonathan Millar, an economist at Barclays in New York.
Profit production fell 0.5 percent in October after adding 0.1 percent in the previous month.
The use of capacity for the manufacturing sector, a measure of how companies are using their resources, rose to 76.2 percent in October, the highest since July 2015, 76.1 percent in September.
The use of global capacity for the industrial sector fell 78.4 percent from 78.5 in September. It is 1.4 percentage points below its average from 1972 to 2017.
The officials of the Fed tend to look at the measures of use of the capacity to indicate the "maintenance" that remains in the economy: the growth in which the space has margin before becoming inflationary.
Lucía Mutikani's report; Editing by Paul Simao