Summary: US output declines after fourth months of gains; contraction in contrast to expected expansion; “concerns of a faltering recovery”; capacity utilisation decreases after August number revised up.
The Federal Reserve’s industrial production (IP) index measures real output from manufacturing, mining, electricity and gas company facilities located in the United States. These sectors are thought to be sensitive to consumer demand and so some leading indicators of GDP use industrial production figures as a component.
Production began recovering in May and subsequent months after collapsing through March and April.
US industrial production contracted by 0.6% on a seasonally adjusted basis in September, the first decline in the last five reported months. The result was in contrast to the 0.6% expansion which had been generally expected and August’s 0.4% increase. On an annual basis, the contraction rate increased from August’s revised figure of -7.0% to -7.3%.
Westpac senior economist Elliot Clarke said the report raised “concerns of a faltering recovery.” He noted “weakness in the auto sector and electronics led the set-back.”
The report was released on the same day as September retail sales figures and the University of Michigan’s latest consumer sentiment report. US Treasury bond yields were largely unchanged and, by the end of the day, 2-year and 10-year Treasury yields remained unchanged at 0.14% and 0.74% respectively while the 30-year yield finished 1bp higher at 1.53%.