Widespread Strength in Factory Report
Industrial production increased 0.7% in September, following an upwardly revised 1.2% gain in the prior month. The industrial production index hit the cycle low in June (see chart) and has since risen every month.
In the third quarter, industrial production rose at an annual rate of 5.2%, the first increase since the first quarter of 2008. Production at the nation’s mines (0.7%) advanced while that of utilities (-0.7%) fell in September.
Factory activity, which excludes mining and utilities and makes up roughly 85% of industrial production, moved up 0.9% after revised gains of 1.2% in each of the prior two months. In the third quarter, factory production advanced at an annual rate of 8.9%, the largest gain since the fourth quarter of 1987! (see chart 3).
Underlying the strong performance of the factory sector were positive contributions from several components. Motor vehicles (+8.0%), primary metals (+3.5%), computer and electronic products (+0.5%), and non-durables (+0.7%) were some of the components posting gains in September. Excluding autos and high-tech, factory production has risen for three straight months.
The operating rate of the factory sector has increased to 67.5% in September from a record low of 65.1% in June 2009. The overall tone of the industrial production report is positive and confirms that an economic recovery is underway.
