Industrial Production Report Far Worse Than Expected for November

Industrial production in the U.S. fell by more than expected in the month of November, according to a report released by the Federal Reserve on Wednesday, with the decrease partly reflecting a steep drop in utilities output.

It marks the largest drop since March 2012, suggesting that weakness in the manufacturing sector is ongoing, and will weigh down 4th quarter growth across the country.

The report said industrial production dropped by 0.6 percent in November following a revised 0.4 percent decrease in October.

Economists had expected production to edge down by 0.2 percent, which would have matched the drop originally reported for the previous month.

The bigger than expected decrease in production was partly due to a sharp drop in utilities output, which plunged by 4.3 percent as unusually warm weather held down the demand for heating. However, the warm weather is boosting housing starts in some parts of the country, offsetting some of the loss due to the decreased heating demand.

Mining output also fell by 1.1 percent, with the Fed attributing much of the decrease to sizable declines for coal mining and for oil and gas well drilling and servicing.

Meanwhile, manufacturing output was unchanged, as the output of non-durable goods climbed 0.5 percent but the production of durable goods dipped 0.2 percent and the index for other manufacturing industries tumbled 1.7 percent.

The Fed also said capacity utilization for the industrial sector slid to 77.0 percent in November from 77.5 percent in October.

Capacity utilization in the utilities sector dropped to 74.5 percent, while capacity utilization in the mining and manufacturing sectors edged down to 79.4 percent and 76.2 percent, respectively.

The manufacturing sector is struggling with a weak global demand and a strong dollar, which is slowing U.S. exports. Also, the U.S. central bank is expected to raise interest rates on Wednesday for the first time in 9 years, which could impact future reports.


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