For the first time in seven months, production at U.S. factories, mines and utilities slipped in November. The decline was largely due to fewer automobiles being produced

Industrial production in the United States slipped 0.2 percent in November after expanding 0.7 percent in October, according to the U.S. Federal Reserve. Last month’s decline, the largest since April, was primarily due to slowdowns in factories’ output of automobiles.

The decrease in output at factories, mines and utilities last month came as a relative surprise to some analysts, as the median estimate of 82 economists polled by Bloomberg News had called for a 0.1 percent advance. Economists polled by MarketWatch had forecast a flat reading.

In November, mining production edged up 0.1 percent while the output of utilities rose 0.2 percent. At 94.8 percent of its 2007 average, total industrial production in November remained 3.7 percent above the prior-year level.

Factory output, the largest component of industrial production, dropped 0.4 percent in November following 0.5 percent growth in October. Last month marked the first decline in factory production since April. Manufacturing accounts for about 12 percent of the nation’s economy.

“Manufacturing was an early bright spot in the economic recovery, helping the nation emerge from the deep recession that ended officially in June 2009. Factories helped lift overall growth in 2009 and 2010,” the Associated Press explains. “They showed smaller gains earlier this year because of the natural disasters in Japan and higher gas prices, which reduced consumers’ buying power. The economy barely grew in the first six months of the year. Factory output strengthened over the summer. And output of autos, auto parts and refined energy products soared.”

The Fed’s latest industrial sector report indicates that even excluding a 3.4 percent drop in motor vehicle production, manufacturing output fell 0.2 percent, reflecting declines in both durable and non-durable manufacturing.

“Manufacturing weakness was fairly broad based,” Cliff Waldman, economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), wrote in an analysis of the Fed report. “Consumer goods and business equipment output both contracted and there was evident weakness in the production performance of both durable and non-durable goods manufacturing.

“A 3.4 percent fall in motor vehicle and parts production was a significant contributor to the 0.1 percent decline in durable goods manufacturing output, but contractions were also seen in the output of electrical equipment and computer and electronic products industries,” Waldman continued. “Further, the sizable 1.7 percent fall in wood products output highlights the continuing drag of a depressed housing market on the factory sector.”

Moreover, the index for business equipment edged down 0.1 percent in November after rising 1.4 percent in October, restrained by less output of motor vehicles and parts for businesses. During the last four months, the index had advanced, on average, more than 1.0 percent per month.

“Fortunately, there were continued gains in the production of industry sectors that are essential for a wide range of manufacturing supply chains such as fabricated metals and machinery, suggesting that the most likely near-term path for the U.S. manufacturing sector is one of modest growth,” Waldman added.

Total industry capacity utilization, which measures how much of the country’s industrial production capabilities are in use, fell to 77.8 percent in November, a rate 2 percentage points above its level from a year earlier but 2.6 percentage points below the 1972-2010 average.

Earlier: Industrial Output Posts Strong Growth in October

Resources

Industrial Production and Capacity Utilization
U.S. Federal Reserve, Dec. 15, 2011

U.S. Industrial Production Unexpectedly Falls
by Alex Kowalski
Bloomberg News, Dec. 15, 2011

Industrial Production Slips 0.2% in November
by Steve Goldstein
MarketWatch, Dec. 15, 2011

U.S. Factory Output Declined Sharply in November
by Daniel Wagner
The Associated Press, Dec. 15, 2011

…Manufacturing Weakness Fairly Broad Based
by Cliff Waldman
Manufacturers Alliance for Productivity and Innovation, Dec. 20, 2011