After a slight decline in September, U.S. industrial production resumed growth in October, registering a strong increase over the same month last year.

Industrial production in the United States expanded 0.7 percent in October, following a downwardly revised 0.1 percent decline in September, according to the U.S. Federal Reserve. Last month’s gain reflects a moderate pickup in factory and mining output, stronger performance in several market categories and a rebound in industrial activity following a relatively slow summer.

Released today, the Fed’s latest industrial sector report states that much of October’s production increase was due to gains in manufacturing output, which constitutes the largest portion of overall industrial output. Following a 0.3 percent rise in September, manufacturing production grew 0.5 percent in October, largely resulting from a 3.1 percent boost in motor vehicles and parts production.

“Although manufacturing accounts for about 12 percent of gross domestic product, the sector has shouldered the economy’s recovery, and October’s industrial production report pointed to resilience in factory activity,” Reuters reports.

October marked the fourth consecutive month of growth in manufacturing output, with production climbing 4.1 percent over the October 2010 total.

Mining production also rose last month, increasing 2.3 percent after a revised 0.5 percent decline in September. Meanwhile, utilities inched down 0.1 percent after posting a 2 percent drop in September. October marked the third consecutive month of contraction in utilities output.

At 94.7 percent of its 2007 average, total U.S. industrial production in October remained 3.9 percent above the prior-year level. The gain exceeded most expectations, as analysts believed uncertainty in global markets, particularly regarding the European financial crisis, would stifle domestic production growth.

“The October gain was the biggest since July and was stronger than the 0.4 percent increase expected by analysts,” MarketWatch explains. “Economists said that recent factory data points to moderate expansion in the sector, subdued by lackluster global growth.”

Durable goods production increased 0.8 percent last month, climbing 7.8 percent above the prior-year level, with durable consumer goods rising 2.1 percent primarily due to a gain in automotive products. Increases of at least 2 percent were also reported for electrical equipment, appliances and components; and aerospace and miscellaneous transportation equipment. Non-durable manufacturing rose 0.2 percent, with the largest gain in apparel and leather products (2.8 percent).

“Producers are benefiting from rising sales both abroad and in the U.S., easing fears a global slowdown might curtail American manufacturing,” Bloomberg News explains. “The need to replenish low stockpiles may further stimulate factory output in the event consumer spending continues to pick up into the holiday season.”

Capacity utilization, which measures how much of the country’s industrial production capabilities are in use, climbed to 77.8 percent in October, up from 77.3 percent in September and 2.1 percentage points above the October 2010 total. However, capacity utilization remained 2.6 percentage points below the average for 1972-2010.

“The good news is that U.S. aerospace firms and other industries are benefiting from the strong growth in emerging economies, and domestic businesses are confident enough in the future to continue expanding purchases of capital equipment,” Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, wrote in an analysis of the Fed report. “A worrisome aspect in the industrial production report is that industries tied to the housing market are still struggling. The unwinding of the negative effects of the housing debacle is, unfortunately, taking a long time and continues to have a limiting effect on the manufacturing recovery.”

Earlier

Industrial Production Edges up in September

Industrial Production Flat in October

Resources

Industrial Production and Capacity Utilization
U.S. Federal Reserve, Nov. 16, 2011

Industrial Output, Capacity Utilization up in October
by Lucia Mutikani
Reuters, Nov. 16, 2011

Industrial Production Expands 0.7% in October
by Greg Robb
MarketWatch, Nov. 16, 2011

Industrial Production Rises More than Forecast
by Alex Kowalski
Bloomberg News, Nov. 16, 2011

MAPI Analysis on Industrial Production: ‘Strong Increase’ in Manufacturing
by Daniel J. Meckstroth
Manufacturers Alliance/MAPI, Nov. 16, 2011