U.S. industrial production slows down in October, mining activity likely to decline further in months ahead

The U.S. industrial production data for the month of October implies that the overall production eased a bit more the month, with softness in motor vehicle production, utilities and the mining sector countered by surprising strength in the ex-motor vehicle manufacturing categories.

The headline industrial production rose 0.1 percent sequentially in October after a downwardly revised 0.2 percent sequential rise in September. The print for October figure was slightly below the consensus expectations of a rise of 0.2 percent. The slowdown at the headline level was driven partially by a 2.8 percent fall in motor vehicle and parts production, reflecting October’s seasonally-adjusted fall in motor vehicle assemblies, stated Barclays in a research report.

Stripping motor vehicles and parts, manufacturing production rose 0.5 percent sequentially after having risen 0.2 percent sequentially in both August and September. Overall, manufacturing production rose 0.3 percent sequentially, in line with consensus expectations, continuing a series of similar rises that stretch back to June and defying recent readings from survey measures such as the ISM that point to some deceleration.

Outside of manufacturing, utilities production dropped 0.5 percent sequentially in October, after last month’s seasonally warm weather, and production in the mining sector dropped 0.3 percent sequentially after having dropped 0.1 percent in September.

“Given the steep declines in oil prices since early October, these declines in mining activity are likely to gather momentum in the coming months”, added Barclays.

The latest estimate of capacity utilization in the manufacturing sector came in at 76.2 percent in October, still below the average from 1972-2017 (78.3 percent).

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -104.316. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex