US industrial production weakened unexpectedly in October.
Industrial production dropped by 0.4% M/M, while the consensus was looking for a slight increase, by 0.2% M/M. Also the previous figure was downwardly revised from 0.4% M/M to 0.2% M/M. The details show that weakness was led by the manufacturing sector (- 0.9% M/M), while also production of utilities dropped slightly (-0.1% M/M) in October. Within utilities, production of natural gas fell by 2.0% M/M, while production of electricity increased by 0.1% M/M.
Mining production increased by 1.5% M/M. The details of the manufacturing sector show broad-based weakness as production of machinery (-1.9% M/M), computers & electronics (-0.3% M/M) and motor vehicles and parts (-0.1% M/M) all dropped during the month. Capacity Utilization slowed significantly, from 78.2% to 77.8%. The Federal Reserve however estimated that the drag from Superstorm Sandy was near 1%, so without the Storm, industrial production would have increased. There might still be some adjustments in the final reading and the Storm might also affect the November production data. So it is very difficult to draw strong conclusions from the data.