Industrial Production Surges

The last piece has fallen into place. The manufacturing component of the industrial production has not been confirming the enormous strength of regional and private surveys nor recent acceleration in factory orders data, that is not until October's 1.3 percent surge and a 3 tenths upward revision to September which is now at 0.4 percent. Manufacturing makes up the vast bulk of the industrial production report where October's headline gain is a higher-than-expected 0.9 percent with capacity utilization up 6 tenths to 77.0 percent.

Motor vehicles are a major positive for manufacturing production, putting together a string of sharp gains including a 1.0 percent October increase. And recent gains in auto sales, in part tied to hurricane-replacement demand, point to continued strength. Selected hi-tech is another center of strength, also showing a string of gains including 1.1 percent in the latest month.

The report's mining component has been uneven in recent months, down 1.3 percent in October, but the year-on-year gain is still formidable at 6.4 percent. Utilities have also been uneven, bouncing 2.0 percent higher and helping to offset the step back for mining. Year-on-year, utility production is up a modest 0.9 percent.

The yearly gain for manufacturing is still moderate at 2.5 percent but all the indications from the factory sector are pointing to acceleration going into year end, an upward pivot that should give a special boost to fourth-quarter GDP.

Note that traditional non-NAICS numbers for industrial production may differ marginally from NAICS basis figures.

Recent History Of This Indicator:
The one key reading out of the factory sector that has yet to show strength is manufacturing production in the Federal Reserve's industrial production report. Manufacturing production inched 0.1 percent higher in September for only the second gain in five months though factory hours in the employment report point to a strong rebound for October. The report's other two components, mining and utility production, have been uneven following this season's hurricanes. Forecasters are calling for a 0.5 percent gain in industrial production for October with manufacturing production seen rising 0.3 percent. Overall capacity utilization is expected to rise 3 tenths to 76.3 percent.