US industrial production fell by 0.1 per cent in October, after analysts predicted an increase of 0.2 per cent and following a 0.7 per cent gain in September (revised from 0.6 per cent).
Paul Dales of Capital Economics says that there "is no evidence that the fall in US industrial production in October is a temporary effect triggered by the government shutdown." He cites the 0.3 per cent month-on-month rise in manufacturing output as suggestive that the trend is still improving.
Industrial production, he continues, fell "because mining output dropped by 1.6% m/m and utilities output declined by 1.1% m/m. Both these falls followed strong rises in previous months. The increase in manufacturing output came despite a 1.3% m/m fall in motor vehicle production and a 0.2% m/m drop in equipment output. The 0.5% m/m rise in output of defence and space equipment suggests the government shutdown didn’t hit activity."
Dales points out that, in the three months to October, manufacturing output rose at an annualised rate of 2.4 per cent - a "decent turnaround" from just 0.1 per cent in July. "As long as the overseas recovery continues and the domestic fiscal drag fades, manufacturing output should continue to grow at a reasonable rate."