Motor vehicle production boosts manufacturing output in October

Total industrial production fell 0.1 percent in October after increasing 0.1 percent in September. Total industrial production has declined in four of the past six months. Over the past year, total industrial output has increased by 3.3% (see the first chart).

Total industrial energy use fell 0.2 points to 79.9 percent, from 80.1 percent in September. Utilization may be plateauing and is above the long-term average (1972 through 2021) of 79.6 percent, but well below the highs of the 1970s when it was above 88 percent.

Industrial production — about 74 percent of total output — posted a gain of 0.1 percent for the month, the fourth consecutive increase and the seventh in the past nine months (see chart one). A year ago, manufacturing output rose 2.4 percent.

Manufacturing utilization was unchanged at 79.5 percent, above its long-term average of 78.2 percent. However, it is still well below the 1994-1995 high of 84.7 percent.

Mining production accounts for about 16 percent of total industrial output and fell 0.4 percent last month (see top of the second chart). Over the past 12 months, mining production has risen 6.9 percent. Utilities output, usually linked to weather patterns and about 10 percent of total industrial output, fell 1.5 percent, the third consecutive drop, with natural gas rising 3.0 percent, but electricity falling 2.4 percent. A year ago, utility production rose 2.5 percent.

Among the main sectors of industrial production, energy production (about 27 percent of total production) decreased by 0.9 percent in the month (see bottom of the second chart) with declines in consumer energy products (-1.4 percent), and primary energy production (- 1.2 percent) and converted energy products by 0.1 percent. However, oil and gas well drilling operations rose 0.8%, while commercial energy products rose 0.1%. Total energy production increased by 5.2 percent compared to last year.

Production of automobiles and parts (about 5 percent of total production) jumped 2.0 percent after a 0.4 percent increase in September (see bottom of the second chart). A year ago, the production of cars and parts increased by 10.7 percent.

Total combined vehicles increased to 11.07 million at a seasonally adjusted annual rate. This consists of 10.73 million light vehicles, the highest since August 2020 (see chart three), and 0.34 million heavy trucks. As for light vehicles, the number of light trucks reached 8.89 million, while the number of cars reached 1.84 million. Compilations rose sharply from lows but remained in the lower half of the previous usual range.

The index of selected high-tech industries fell 0.6 percent in October (see bottom of the second chart) and was up 2.6 percent year-on-year. High-tech industries account for only 2.1% of total industrial output.

All other industries combined (total excluding energy, high-tech, and automobiles; about 66 percent of total industrial output) rose 0.1 percent in October (see bottom of the second chart). This important category is 1.9 percent over October 2021.

Overall, industrial production declined in October while industrial production rose as auto production increased. Many other areas were weak. While most measures of economic activity point to the economy continuing to expand, soaring price increases, weak consumer confidence, aggressive Fed tightening cycle and fallout from Russia’s invasion of Ukraine continue to pose significant threats to the economic outlook. Caution is required.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after more than 25 years in financial and economic markets research on Wall Street. Bob was previously Head of Global Equity Strategy for Brown Brothers Harriman, where he developed an equity investment strategy that combined top-down macro analysis with bullish fundamentals.

Prior to BBH, Bob was chief equity analyst at State Street Global Markets, chief economic analyst at Prudential Equity Group and chief economist and financial markets analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business Administration from Lehigh University.

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