Industrial output rebounds in October

/ Source: The Associated Press

Industrial output posted a bigger-than-expected rebound in October after plunging in September by the largest amount in over 60 years.

The Federal Reserve said Monday that industrial output rose 1.3 percent last month, reflecting a return to more normal operations following hurricanes and a strike at aircraft manufacturer Boeing Co. the previous month.

Those disruptions along with the weak economy caused industrial production to fall by 3.7 percent in September, the biggest one-month drop since a 5 percent plunge in February 1946.

The 1.3 percent increase in October was bigger than the 0.2 percent rise that economists expected, but the September decline was worse than the 2.8 percent drop originally reported.

Analysts said the outlook for the industrial sector remained gloomy, given that they believe the country has tumbled into what could be a prolonged recession.

Nigel Gault, chief U.S. economist at IHS Global Insight, said he believed industrial production for all of 2009 will drop by 3.5 percent, which would be the worst performance since the recession year of 1982.

"Do not be fooled by the sharp headline increase in industrial production," he said. "Consumer demand is falling rapidly and the export cushion is disappearing."

Exports, which had been the one bright spot for the economy this year, have faltered recently as the weakness in the U.S. spreads to economies overseas.

The government attributed the steeper fall to revised data showing that Hurricanes Gustav and Ike had a bigger impact on the chemical industry than initially thought.

The rebound reflected a return to more normal operations at chemical plants, oil refineries and drilling platforms along the Gulf Coast.

The big drop in output in September and the increase in October were heavily influenced by the hurricanes and the strike at Boeing. Without those special factors, total industrial production would have fallen by around 0.6 percent in both September and October, the Fed said.

Manufacturing posted a 0.6 percent rise in October after having fallen by 3.7 percent in September. Manufacturing has been under pressure, including the ailing auto industry, with economists forecasting further troubles ahead as the country undergoes what many expect to be a severe recession.

Output at the nation's mines, which includes oil drilling, shot up by 6.1 percent in October reflecting the resumption of production at Gulf Coast rigs following an 8.5 percent drop in September. Production at the nation's utilities edged up by 0.4 percent in October after posting a 2.4 percent gain in September.

All the changes left U.S. industry operating at 76.4 percent of capacity in October, up from an operating rate of 75.5 percent in September.