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November 16, 2021 11:30 AM, EST

Factory Output Rises More Than Forecast

Factory Output Rises More Than Forecast A worker spot welds a metal door during production at the Metal Manufacturing Co. facility in Sacramento, Calif. (Bloomberg)

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Production at U.S. factories rose in October by more than forecast, bouncing back from the effects of Hurricane Ida and suggesting manufacturers are having a better time addressing materials shortages.

The 1.2% increase in manufacturing production followed a 0.7% decline in September, Federal Reserve data showed Nov. 16. Total industrial production, which also includes mining and utility output, advanced 1.6% in October.

The median estimate in a Bloomberg survey of economists called for 0.9% monthly increases in both factory production and total industrial output.

Healthy business investment combined with firm consumer demand have fueled orders growth for manufacturers but have also depleted inventories and resulted in increased backlogs. The report suggests that producers are working through materials shortages and employment remaining below pre-pandemic levels.

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The report showed that the increase in factory production was driven in part by an 11% rebound in the output of motor vehicles and parts, suggesting automakers are having more success increasing output despite the ongoing global semiconductor shortage. The gain was the largest since July of last year.

Excluding autos and parts, manufacturing output rose 0.6% after a 0.2% decline a month earlier.

Factory production of non-durable goods climbed 1.3% in October, the first advance in three months and driven by petroleum and coal.

“The gains in nondurable and energy materials largely reflected a return to operation for many chemical and energy facilities that had been offline due to Hurricane Ida,” the Fed said in the report. About half of the increase in total industrial production last month reflected a recovery from the effects of Ida.

Categories including consumer goods, business equipment and materials all advanced from the prior month.

Manufacturing capacity utilization, a measure of plant use, rose to 76.7%, the highest since January 2019. Total industrial capacity climbed to 76.4%.

A separate report Nov.15 showed manufacturers in New York state expanded in November by more than forecast as orders growth and employment accelerated. At the same time, optimism about business conditions over the next six months pulled back.

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