Does U.S. industrial production data indicate slowdown?

U.S. industry expanded slightly in October, with manufacturing growth offsetting declines in mining and utility production.

Industrial production ticked up a modest 0.1% last month, the Federal Reserve reported Friday. It was the fifth straight monthly gain and left output up 4.1% on a year-over-year basis.

The Fed said that recent hurricanes lowered production by about a 0.1 percentage point in both September and October.

The economy has been growing at a solid rate this year. The gross domestic product expanded at an annual rate of 3.5% in the July-September quarter, with manufacturing contributing to the momentum.

But there are concerns that the strong dollar and a slowdown in global growth could hurt future U.S. export sales. There are also worries about labour shortages and the impact of President Donald Trump’s get-tough trade policies, which have featured higher tariffs on aluminum and steel along with penalty tariffs on a range of Chinese goods. Other countries have already retaliated with penalty tariffs on American products.

Andrew Hunter, U.S. economist at Capital Economics, said that the new report “provides further evidence that economic growth is set for a gradual slowdown in the fourth quarter.”

Based on the industrial production report, economists at Macroeconomic Advisers trimmed their expectation for GDP growth in the current October-December quarter from a 2.6% rate down to 2.5%. That would be a full percentage point below the third quarter’s 3.5% growth rate.

Factory output was up 0.3% in October, matching the previous month despite a big drop in auto production, which fell 2.8% last month. It was the second decline for the auto sector in the past four months.

With the volatile auto component contributing to today’s industrial production data, Katherine Judge, CIBC economist, said in Friday commentary that market reaction should be contained.

Meanwhile, Trump’s tariffs on foreign-made steel and aluminum may have boosted prospects for U.S. producers. The Fed report showed that production of primary metals jumped a strong 3% in October—the highest monthly gain since November 2012.

Output at the nation’s utilities dropped 0.5% in October after a smaller 0.1% decline in September. Output in the mining sector, which includes oil and gas production, was down 0.3% in October following a smaller 0.1% September dip. Both of those declines came after this sector reached an all-time high in August, reflecting strong gains in oil and gas production.

Staff, with files from The Associated Press

The Associated Press is an American not-for-profit news agency headquartered in New York City.