NEW YORK (CNN/Money) -
Production from the nation's factories, mines and utilities rose at a slower pace in October, the Federal Reserve said Friday, missing Wall Street expectations.
The report showed industrial production rose 0.2 percent in October after rising 0.4 percent in September. Economists, on average, expected production to rise 0.4 percent, according to Briefing.com.
Capacity utilization, the percentage of production capacity factories used in the month, was 75 percent, compared with 74.7 percent in September. Economists expected a capacity utilization rate of 75 percent, according to Briefing.com.
The report somewhat contradicted the October survey of manufacturing activity by the Institute for Supply Management (ISM), closely watched by Wall Street and economists for signs of the future of manufacturing.
That survey showed gathering strength, and many economists hoped a third-quarter decline in inventories would force businesses to re-stock their shelves in the fourth quarter, pushing industrial output higher.
"The ISM survey clearly promises much bigger increases in production ahead, but for now the official data are lagging the survey a bit," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd.
U.S. stock prices fell in early trading, while Treasury bond prices were mostly lower.
Earlier Friday, the Labor Department reported a bigger-than-expected jump in its measure of producer price inflation (PPI), and the Commerce Department reported a bigger-than-expected decline in retail sales for October.
Separately, Reuters reported that the University of Michigan's consumer sentiment index, based on a survey of 500 households, rose to its highest level since May 2002.
In the Fed's report, factory output rose 0.1 percent in October, held back by a 3.8 percent decline in the output of automobiles and auto parts. Weak auto sales and high auto prices were highlights of the retail sales and PPI reports, as well.
Mining output fell 0.8 percent, and production at utilities increased 2.0 percent.
At 75 percent, the rate of capacity utilization is still 6.3 percentage points below its 1972-2002 average. With so much factory equipment sitting idle, and with millions of Americans still unemployed, the Fed has had little incentive to raise interest rates.
In recent days, several Fed officials have said that, despite signs of an economic turnaround, the Fed is in no hurry to raise its key short-term interest rate from its current level, the lowest in 41 years, saying the economy needs to turn in strong growth for a sustained period before all the slack in the economy is taken up, forcing inflation to accelerate.
"There's no sign of inflation, and the labor market is still weak," said Drew Matus, senior economist at Lehman Brothers. "There's still plenty of room from the Fed's point of view."
|
