October Sees Strong Rebound in Industrial Output

U.S. industrial production rose in October, recovering its footing after stumbling in September.

The output of factories, mines, and utilities in the U.S. jumped 1.1 percent, the Federal Reserve reported Tuesday. That was slightly better than the 1 percent gain forecast by economists.

In another positive for the economy, the September decline was revised from a 0.6 percent drop to a smaller 0.4 percent fall.

Manufacturing output rose 1 percent and has recovered much of the ground lost at the height of the pandemic and lockdowns this spring. Still, output remains 5 percent below the prepandemic level in February.

The three-tenths of a point decline initially recorded for manufacturing output in September was revised to a one-tenth of a percent gain. U.S. factory output has now increased for six consecutive months.

Factory output rose across the board. Production of business goods rose 0.6 percent. Production of consumer goods rose 0.8 percent. Construction goods production rose one percent, a reflection of the strength of the housing market.

Mining production—which includes oil and natural gas drilling—fell sixth tenths of a percent, driven down by weak demand for energy. Production at utilities rose 3.9 percent.

Economists expect future gains in industrial production will largely depend on how consumers, businesses, and government reacts to the third wave of coronavirus infections now hitting most parts of the U.S.  A new round of lockdowns could depress consumer and business spending again, pushing unemployment back up and heightening the need for an aid package from Washington, D.C.

“We expect industrial activity to continue recovering its pandemic-induced losses, but growth will be slower compared to the summer months,” said Oren Klachkin, an economist with Oxford Economics. “A rapidly deteriorating health situation poses significant downside risks to industrial activity, particularly if more fiscal aid isn’t delivered.”

Congress defied hopes that it would pass another aid package in the leadup to the U.S. election as Democrats focussed their energies on denying Trump a legislative win even if that came at an economic cost. Legislation seems even more unlikely to happen until the controversy over who won the 2020 presidential election is resolved and control of the Senate is decided by the run-off elections in Georgia.

The virus has killed more than 247,000 Americans this year and infected at least 11.1 million — about 1 million in the past week alone.

“We’re going into a very dark winter. Things are going to get much tougher before they get easier. That requires sparing no effort to fight covid so that we can open our businesses safely. Resume our lives and put this pandemic behind us. It’s going to be difficult but it can be done,” Biden said.

Capacity utilization increased eight-tenths of a percentage point in October to 72.8 percent. That is well below the 76.9 percent utilization rate recorded in February. Capacity utilization in manufacturing rose seventh-tenths of a percent to 71.7 percent, which compares to 75.7 percent in February. The September utilization figure was revised up from 70.5 to 71 percent.

–The Associated Press contributed to this report.