Industrial Production Has Largest Monthly Decline Since January

Industrial production unexpectedly declined -.5% MoM (consensus +.2%) in October. Capacity utilization also weakened unexpectedly to 81.7% (consensus 82.1%). The -.5% monthly decline in production was the largest since January, when the economy was working through the inventory overhang. Capacity utilization was last this low in April. Industrial production has risen 1.8% YoY.

The weakness in October was lead by a -1.6% MoM decline in utility demand, probably due to the warmer than normal temps. Mining output fell -.6% MoM and manufacturing production fell -.4% MoM. Durable goods production fell -.2% MoM and nondurable fell -.4% MoM.

There were widespread declines in consumer goods output, which dropped -.7% MoM. Consumer durable goods continued to fall for the third month in a row, down -.6% MoM, though it is up +5.2% YoY. As expected with the housing slump, demand for appliances, furniture and home electronics all fell over -.5% MoM. Construction supplies fell -.4% MoM and is essentially unchanged YoY.

On the positive side, aircraft demand kept transit output up 1.7% MoM, but construction equipment output dropped substantially. Defense demand grew +.4% MoM.