Industrial production rose by 0.1% in October according to the Federal Reserve. While industrial production is not typically volatile, it speaks to the overall stability of the US economy and consequently the strength of the greenback which typically has an inverse relationship with the price of gold.
While the report today shows a stable economy, the price of gold is holding recent gains and trading at the time of writing at $1,221.31/oz and up 0.7% on the day after dropping recently.
Key Takeaways
- Production is 4.1% higher compared to October of last year.
- Last month manufacturing output rose by 0.3% and mining output dropped by 0.3% while utilities fell by 0.5%.
- The 5th consecutive monthly gain in manufacturing proportionately outweighed other declines to bring overall production up 0.1% monthly and the index is estimated to have risen at an annual rate of 4.7% in Q3.
- The quarterly gain was revised upwards from a much lower initial estimate of 3.3%.
Hurricanes had an impact on production in October and September but this is estimated to be limited to 0.1% decreases in the index. The total industrial production is 4.1% higher than it was last year with a current reading of 109.1% of the 2012 average for the index. Capacity utilization for the industrial sector was 78.4%, 1.4% below the long-term average measured between 1972 and 2017.
The Fed states that the activity is due to mining reaching an all-time high in August during the ongoing boom in oil and gas production.
The index for business equipment rose 0.8% in October with a 0.9% increase in the index for defense and space equipment. Both indexes have registered increases for 5 straight months which was in part spurred on by the big spending bill rolled out earlier in the year to ramp up defense spending.
Motor vehicle assembly slowed down after stronger readings the two months prior and now coming in at a seasonally adjusted annual rate of 11.08 million. Capacity utilization fell to 78.4% from the previous upwardly revised figure of 78.5% in September.
As we’ve seen in other manufacturing reports and surveys, manufacturers continue to express concern about tariffs and an economic slowdown, but the recent report is nevertheless evidence of a strong and stable US economy following a peak in production in August - whether things will continue to slow or simply hold firm at the top is as of yet unclear.
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