The Federal Reserve released data on Tuesday revealing an unexpected 0.1% decrease in U.S. industrial production for November, following a revised 0.4% decline in October. This marks the third consecutive month of falling production, surprising economists who had predicted a 0.3% increase.
Sector-Specific Trends
The modest decline was driven by significant drops in mining and utilities output, which outweighed a slight rebound in manufacturing.
- Mining Output: Slumped by 0.9% in November, extending its 0.1% dip in October.
- Utilities Output: Tumbled 1.3% after a strong 1.3% jump in the previous month.
- Manufacturing Output: Provided a slight reprieve, rising 0.2% after falling 0.7% in October.
These figures suggest continued struggles in the industrial sector, with mixed performance across its key components.
Capacity Utilization Declines
The report also indicated a decline in capacity utilization, a measure of how fully firms are utilizing their resources. Capacity utilization in the industrial sector slipped to 76.8% in November, down from 77.0% in October. Analysts had expected it to rise to 77.3%.
- Manufacturing Utilization: Increased slightly to 76.0%.
- Mining and Utilities Utilization: Dropped to 88.8% and 70.0%, respectively.
Economic Outlook and Analyst Insights
Bernard Yaros, Lead U.S. Economist at Oxford Economics, noted the downturn exceeded expectations, stating, “Industrial production fell for the third month in a row, bucking even our below-consensus forecast for a modest gain.”
Despite the weak performance, Yaros remains optimistic for 2024, citing factors like reduced policy uncertainty and interest-rate relief as potential catalysts for a rebound.
Conclusion
November’s industrial production data highlights persistent challenges in the U.S. industrial sector, particularly in mining and utilities. While manufacturing shows slight improvement, the overall decline signals near-term headwinds. Optimism remains for a recovery next year, provided economic conditions stabilize and interest rates ease.