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Factory in Action Photo by Bill Pugliano/Getty Images

U.S. Factory Production Rises for Third Time in Four Months

With consumer goods and construction material production on the rise, the manufacturing is finally showing signs of recovery.

Output at U.S. manufacturers rose for the third time in four months on production of consumer goods and construction materials, a sign the industry is gradually recovering from a prolonged spell of weakness.

The 0.2% gain at factories, which make up 75% of production, followed a 0.5% decrease the prior month, a Federal Reserve report showed Monday in Washington. The median forecast in a Bloomberg survey of economists called for a 0.1% gain. Total industrial production, which also includes mines and utilities, increased 0.1%.

Production is beginning to revive due to a diminishing drag from a range of forces including lower oil prices, the strong dollar and weak overseas markets. Steady household spending, the biggest part of the economy, also is a sign factories will keep busy in coming months and gradually begin to contribute to economic growth.

"The drag from falling energy investment has abated," said Ryan Wang, an economist at HSBC Securities USA Inc. in New York, who correctly projected the rise in factory production. "That should allow overall business investment to resume modest growth in the year ahead. We're still likely to see minimal gains in manufacturing output."

The latest results are consistent with the Institute for Supply Management's factory survey, which showed manufacturing expanded at a modest pace in September after unexpectedly shrinking the prior month.

Analyst Estimates

Manufacturing accounts for about 12% of the economy. Economists' estimates for factory output in the Bloomberg survey ranged from a decline of 0.2% to an advance of 0.4%. The August reading was previously reported as a 0.4% decrease.

For total industrial production, the Bloomberg survey median called for a 0.1% advance, with estimates ranging from a drop of 0.2% to an advance of 0.5%. The prior month was previously reported as a decline of 0.4%.

Mining production, which includes oil drilling, increased 0.4%, reflecting stabilization in the price of oil and other commodities. Oil and gas well drilling output rose for a fourth month, gaining 5.1% in September.

Utility output dropped 1%, after a 0.3% decline the previous month, the Fed report showed.

Industrial Capacity

Capacity utilization, which measures the amount of a plant that is in use, rose to 75.4% from 75.3% in the prior month.

Consumer goods production expanded 0.2%, while output of business equipment decreased 0.2%. Construction materials climbed 0.8% after a 1.4% drop.

The output of motor vehicles and parts increased for a fourth month, rising 0.1% after a 0.9% gain a month earlier. Excluding autos and parts, manufacturing rose 0.2% after a 0.6% decline.

Machinery production was down 0.6%, while output of computers and electronics was little changed.

by Shobhana Chandra, Bloomberg

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