Instant View: Industrial production falls in September

NEW YORK (BestGrowthStock) – U.S. industrial production unexpectedly fell in September, while capacity utilization eased slightly, according to a report on Monday that supported expectations of further monetary easing next month.

KEY POINTS: * Production fell 0.2 percent after increasing 0.2 percent in August, the Federal Reserve said. * Economists had expected September’s industrial production to rise 0.2 percent. * Manufacturing fell 0.2 percent last month and declined by a similar margin excluding motor vehicles and parts, the Fed said. Mining output rose 0.7 percent last month, while utilities dropped 1.9 percent.

COMMENTS:

PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:

“The manufacturing sector outside of motor vehicles is weak, down 0.2 percent. The softness is in accord with the ISM numbers that have pointed to a slowdown in demand. It’s disappointing that we’re not seeing export growth in the way we might have hoped. People are deciding whether or not to pull back on capital spending because the demand picture is poor. That manufacturers are addressing unwanted inventory buildup is constructive. They’re being careful in light of uncertainties about demand growth.”

TOM SCHRADER, MANAGING DIRECTOR, U.S. EQUITY TRADING, STIFEL

NICOLAUS CAPITAL MARKETS, BALTIMORE:

“It was weaker. I tend to pay more attention to the revised number and the revision of industrial production was down a little bit, but the markets are not reacting whatsoever.”

GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST.

LOUIS, MISSOURI:

“We did see electrical output and utilities decline for a couple of months; over the summer we had high demand in June and July. We’re seeing some moderation now. So it’s added to the weakness we’re seeing in the manufacturing sector which is cooling off also.

“The first year of a recovery is when you get the greatest inventory rebuild and now companies are being a bit more cautious. We’ve seen manufacturing orders slow at the same time inventories have increased so manufacturers are holding back on production. That’s typical of a second year of a recovery. That’s why we often see a soft spot at this point.”

TOM PORCELLI, U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“We’re not that surprised by the weakness. Industrial production, for the most part, is a lagging indicator. We already had ISM in hand. IP is really a reflection of what we saw in the ISM report.

“Looking at some of the detail here it seems pretty clear that there is broad-based weakness. Even stripping out some of the key categories that are the usual culprits, it is still clear that there is weakness.

“I think the shock value of seeing the decline in industrial production could perhaps provide a bid for Treasuries but in the end we shouldn’t be too surprised here.”

MARKET REACTION: BONDS: U.S. Treasury debt prices were steady at higher levels. DOLLAR: U.S. dollar steady at higher levels versus the euro.

Instant View: Industrial production falls in September