Industrial production in the US advanced in September on growing demand for automobiles and computers after stalling the prior month, a sign manufacturers are contributing to growth.
Output at factories, mines and utilities increased 0.2 per cent, in line with the median estimate in a Bloomberg News survey, after being little changed in August, figures from the Federal Reserve showed today. Factory production, which makes up 75 per cent of the total, climbed for a third month.
Companies like General Motors Co. (GM) and Alcoa Inc. (AA) are getting a lift as Japan recovers from the earthquake and tsunami, and as demand from emerging markets and business investment boosts orders.
At the same time, shipments to Europe may cool as the region's debt crisis lingers, indicating factory assembly lines will probably not be running at full tilt.
"Manufacturing is still positive, but it's just not as strong as we'd like," Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report.
"We've gone from looking at the possibility of a recession to stepping back and dealing with a slow-growth environment."
Estimates of the 75 economists surveyed by Bloomberg ranged from an increase of 0.5 per cent to a drop of 0.3 per cent.
The Fed previously reported the August reading as a 0.2 per cent increase. Manufacturing accounts for about 12 per cent of the economy.
EMPIRE STATE
Another report showed manufacturing in the New York region contracted in October at a faster pace than forecast, reflecting a lack of confidence in the recovery that failed to be confirmed by measures of orders and sales.
The Federal Reserve Bank of New York's general economic index rose to minus 8.5 from minus 8.8 in September.
Readings less than zero signal companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are cutting back.
Today's industrial production report showed factory output climbed 0.4 per cent after increasing 0.3 per cent in August.
Capacity utilisation, which measures the amount of a plant that is in use, increased to 77.4 per cent from 77.3 per cent in August. The gauge compares with the average of 79.5 per cent over the past 20 years.
Mining production, which includes oil drilling, rose 0.8 per cent. Utility output dropped 1.8 per cent after decreasing 2.9 per cent in August.
AUTO DEMAND
The output of motor vehicles and parts increased 0.7 per cent after climbing 1.5 per cent a month earlier, today's report showed. Excluding autos and parts, manufacturing rose 0.3 per cent in September for a second month.
Production of business equipment advanced 1 per cent last month, reflecting a 1.9 per cent gain in computer output. The increases signal investment in capital equipment continues to climb.
Automobile manufacturing, which has recovered from supply chain disruptions related to Japan's earthquake earlier this year, is supporting factories through the current period of sluggish growth. September vehicle sales rose to a 13 million seasonally adjusted annual rate, exceeding median forecast of analysts surveyed by Bloomberg and the strongest since April, according to industry data.
Detroit-based GM reported sales rose 20 per cent in September from a year earlier, and company executives don't believe the economy is falling back into a recession. Economic data "all point to a slow-growth scenario, not a double dip," Don Johnson, GM vice president of US sales, said on an Oct. 3 conference call.
FACTORIES EXPANDING
Other indicators show manufacturing may have skirted a contraction after economic growth slowed in the first half of 2011 to weakest pace since the recession began.
The Institute for Supply Management's factory index climbed to 51.6 last month from 50.6 in August, the Tempe, Arizona-based group said Oct. 3. A level greater than 50 signals expansion.
Alcoa, the largest US aluminum producer, has looked past swinging stock markets and Europe's sovereign debt crisis, as the company expects demand to recover. While the New-York based company posted profit last week that trailed analysts' estimates as European customers cut back, it maintained its 2012 global demand growth forecast of 12 per cent.
"We've seen strength in many of our markets despite the sharp slowdown in Europe that hurt our sequential results, and I'm more concerned about the lack of confidence than about market fundamentals," Klaus Kleinfeld, Alcoa's president and chief executive officer, said in an Oct. 11 call with analysts. "It almost looks like the world is worrying itself into another recession and that should not be allowed to happen."
