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U.S. Factory Output Drops by Most Since April on GM Strike
© Reuters. U.S. Factory Output Drops by Most Since April on GM Strike
(Bloomberg) -- U.S. manufacturing output slumped in October by the most in six months as an auto workers’ strike at General Motors (NYSE:GM) curtailed vehicle production and the trade war continued to weigh on other factories.
The 0.6% decline in output followed a 0.5% decrease the previous month, Federal Reserve data showed Friday. Excluding the 7.1% drop in motor vehicle output, which was the largest since January, factory production decreased a more modest 0.1% for a second month.
Total industrial production, which also includes output at mines and utilities, slumped 0.8% in October, the largest setback since May 2018.
Key Insights
- The data are consistent with other reports showing cracks in the factory sector as producers grapple with sluggish global demand, slower business investment and the U.S.-China trade war. The Institute for Supply Management’s gauge contracted three straight months, while a separate index showed global manufacturing shrank in October for a sixth month.
- All major market groups, including consumer goods and business equipment, reported declines in output for at least a second month.
- Factory production may rebound next month as the striking United Auto Workers reached an agreement with GM late in October. Overall the strike cost the company nearly $3 billion and lasted 40 days.
- Aside from the slump in automaker output, production also retreated at makers of computers, electrical equipment, chemicals, apparel and fabricated metals.
- The median forecast of economists in the Bloomberg survey for manufacturing output called for a 0.7% decline.
- Of the three main industrial production groups, mining dropped for a second month on weakness in the oil patch, while utilities registered the sharpest drop since June.
- Capacity utilization, measuring the amount of a plant that is in use, fell to 76.7% from 77.5%. Capacity utilization at manufacturers decreased to 74.7%, the weakest since September 2017.
- The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up about three-fourths of total industrial production, accounts for about 11% of the U.S. economy.
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