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Economic Report: U.S. manufacturing sector losing steam

The numbers: U.S. industrial production fell 0.1% in October, the Federal Reserve reported Wednesday.

The gain was below Wall Street expectations of a 0.1% gain, according to a survey by The Wall Street Journal.

Output in September was trimmed to a slight 0.1% gain from the initial estimate of a 0.4% gain.

Capacity utilization dipped to 79.9% in October from 80.1% in the prior month. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities. 

Economists had forecast a 80.4% rate.

Key details: Manufacturing output edged up 0.1% in October and increases in July, August and September were all lower than previous estimates.

Motor vehicles and parts output rose 2% after a 0.4% gain in the prior month. Excluding autos, total industrial output fell 0.2%.

Utilities output fell 1.5% in October after a 1.7% drop in the prior month. Mining output, which includes oil and natural gas, fell 0.4% after a 0.7% gain in the prior month. 

Big picture: Manufacturing activity has been softening in recent months. The manufacturing ISM index fell to 50.2 in October, the lowest level since May 2020. Export orders are soft, in part because of the stronger dollar, but domestic demand is also cooling.

“Overall, manufacturing is close to stagnation,” said Paul Ashworth, chief North American Economist at Capital Economics.

Looking ahead: “Weakening demand, higher interest rates, and supply chain difficulties will continue to pose challenges for industrial activity in the months ahead,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.

Market reaction: Stocks


opened lower Wednesday. The yield on the 10-year Treasury note

fell to 3.72%.

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