US: September Industrial Production Points to Steady Expansion - Nomura

Analysts at Nomura noted that September industrial production (IP) increased 0.3% m-o-m, stronger than our forecast but in line with market expectations.

Key Quotes:

"September industrial production (IP) increased 0.3% m-o-m, stronger than our forecast but in line with market expectations (Nomura: 0.0%, Consensus: 0.3%), following an upwardly-revised 0.7% decline (previously reported as a 0.9% decline). The Federal Reserve Board (FRB) reported that the continued impact of Hurricane Harvey and, to a lesser degree, Hurricane Irma lowered total IP by 0.25pp in September. Excluding transitory effects, today’s report suggests steady expansion in industrial activity. Manufacturing sector output excluding autos increased modestly by 0.1%. Autos and parts output increased 0.1%, slightly softer than our expectations, after increasing 3.6% in August. Total manufacturing output has improved at a solid pace, recovering from weakness in 2015 and 2016, and has contributed solidly to aggregate IP.

Further, mining sector output increased steadily by 0.4%. The 12-month rate has plateaued in recent months, in line with stabilizing active oil and gas rig counts. Utilities output grew solidly by 1.5% despite power outages in Florida caused by Hurricane Irma.

The revision to August output, distorted by Hurricane Harvey, was notable but not very significant. Previously, the FRB reported that the impact from Harvey in August was primarily concentrated in petroleum refining, organic chemicals, and plastics materials & resins. One source of the revision to August output was petroleum refining and coal output as August was revised up to a 0.1% decline, from a 1.6% decline, but July was lowered to a 3.1% decline, from a preliminary number of a 0.5% drop. For September, petroleum refining and coal output was down by 1.7%, suggesting a lagged effect from Hurricane Harvey for the sector.

Chemicals output for August was lowered to a 2.3% decline, from a previously-reported 2.2% decline, reflecting Harvey’s impact on organic chemicals output. Contrary to our expectations, chemical output did not rebound in September, falling 2.6%. This suggests that petrochemical industry output did not recover as quickly as we expected and the impact from Harvey may have been longer-lasting than anticipated. Anecdotal evidence suggests some plants in the Gulf Coast area have not fully reopened."