Utilities charge production
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October 17, 1997: 9:57 a.m. ET
Surge in electricity generation pushes industrial production figure higher
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NEW YORK (CNNfn) - A boost in electricity production by the nation's utilities shocked industrial production higher last month, the U.S. Federal Reserve said Friday.
Industrial production, the output of the nation's factories, mines and utilities, rose 0.7 percent in September, more than twice the increase forecast by economists.
As a result, those industries were making the most of their production resources. The capacity utilization rate, which measures the percentage of production ability being used, pushed ahead to 84.4 percent, its highest rate since February of 1995.
Much of the rise can be attributed to an increased need for electricity in September, the Federal Reserve said, after a cooler August around the nation reduced the need for air conditioning. Overall, utility production surged 4.4 percent last month.
The U.S. bond market scrambled after the news, which came on top of strong housing starts figures earlier Friday. The benchmark 30-year Treasury bond fell 14/32 just after the production results, driving the yield higher to 6.42 percent.
The increase is less inflationary than it may appear, said economist Ken Goldstein of the Conference Board. Strong consumer demand makes it only logical for industries to increase output.
"The continued growth in consumption, not just in the second half of this year but continuing into 1998, means that [producers] have to invest. They've got to build up inventories," said Goldstein.
The manufacturing sector output managed a more modest gain of 0.4 percent. Strong advances in furniture, iron and steel, and computers in the durable goods area were blunted by a decrease in industrial machinery production.
In the non-durable goods sector, paper, chemicals and petroleum refining made strong gains. The output of consumer goods rose 0.7 percent.
Mining output in the United States continued falling in September, retreating 0.5 percent in a trend that has occurred over the previous three months.
-- Randy Schultz
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Federal Reserve
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