The slump of the U.S. manufacturing sector worsened in October, in part because the now-concluded United Auto Workers strike at General Motors.
Industrial production fell by eight-tenths of a percentage point, the Federal Reserve reported Friday. Economists had been expecting a 0.5 percent decline.
The strike-driven decline in auto production played a big role. Auto production fell 7.1 percent in October. That followed a 5.5 percent decline in September. That helped pull down overall manufacturing output, which fell 0.6 percent in October following September’s 0.5 percent decline.
Capacity utilization in the October report declined eight-tenths to a lower-than-expected 76.7 percent, the lowest reading in over two years.
Some of that lost production is likely to be made up in the coming months now that the General Motors facilities are back up and running. It’s likely that November and December’s figures could include huge jumps in output.
Unfortunately, the slowdown cannot fully be ascribed to the strike. Even excluding autos, industrial production was down 0.5 percent. Production of business equipment dropped 0.6 percent in October, which was not quite as bad as the 1.1 percent drop in September. Those looking for a silver-lining could say that the decline in business investment may be reaching its ebb.
In addition to manufacturing, utilities output is a second major component in industrial output. This was likely weighed down by the slowdown in manufacturing volumes and perhaps by the California rolling blackouts and fires. This fell 4.0 percent in October.
The third component is mining, which saw a 0.7 percent drop in October following September 0.8 percent decline. This is largely driven by energy prices and reflects the decline in oil prices due to ample supply and sluggish global growth.