US industrial production surges in third quarter - Consumer confidence sinks in October

US industrial production surges in third quarter - Consumer confidence sinks in October
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: October 16 2009 15:19 | Last updated: October 16 2009 15:19
http://www.ft.com/cms/s/0/7e130d94-ba55-11de-9dd7-00144feab49a.html


US industrial production rose at the fastest rate in four years during the third quarter as manufacturers ramped up their efforts to match rekindling demand, but consumers remain anxious about the outlook for the economic recovery.

The pace of production has increased in each of the last three months and climbed in September by 0.7 per cent, Federal Reserve figures showed, surpassing economists’ estimates of a 0.2 per cent rise. The 5.2 per cent jump in third-quarter production was the biggest since 2005, but industrial production remains off by 6.1 per cent year-on-year.

“A combination of aggressive inventory liquidation in the first half of the year and stabilising orders suggests that manufacturing output will be better supported in coming months,” said Joshua Shapiro, chief US economist at MFR. “A need to replenish automotive inventories will play an important role in this move after the ‘cash for clunkers’ programme.”

In September, much of the monthly increase was due to the continued surge in car production, which was stimulated by the popular “cash-for-clunkers” rebate programme which expired in August. Output of car products last month was up by 7.4 per cent.

“This pickup in output occurred despite what appears to be a continued rapid rate of reduction in inventories in the third quarter, which leaves plenty of room for a slowdown in inventory liquidation to further boost manufacturing activity in the months ahead,” noted John Ryding and Conrad DeQuadros, economists at RDQ Economics.

Manufacturing and mining activity both rose in September, while production at utilities slumped. Meanwhile, the capacity utilisation rate, a measure of the proportion of plants in use, across all industries, rose from 69.9 to 70.5.

Separately on Friday, a report showed consumer sentiment fell in October. The Reuters/University of Michigan confidence survey showed a big drop in future expectations, pulling the overall index down from 73.5 in September to 69.4 this month. The decline was worse than Wall Street analysts anticipated as consumers expressed anxiety about their personal finances.