US factory production rises for third time in four months

NEW YORK (BLOOMBERG) - Output at US manufacturers rose for the third time in four months on production of consumer goods and construction materials, a sign the industry is gradually recovering from a prolonged spell of weakness.

The 0.2 per cent gain at factories, which make up 75 per cent of production, followed a 0.5 per cent decrease the prior month, a Federal Reserve report showed Monday in Washington. The median forecast in a Bloomberg survey of economists called for a 0.1 per cent gain. Total industrial production, which also includes mines and utilities, increased 0.1 per cent.

Production is beginning to revive due to a diminishing drag from a range of forces including lower oil prices, the strong dollar and weak overseas markets. Steady household spending, the biggest part of the economy, also is a sign factories will keep busy in coming months and gradually begin to contribute to economic growth.

"The drag from falling energy investment has abated," said Ryan Wang, an economist at HSBC Securities USA in New York, who correctly projected the rise in factory production. "That should allow overall business investment to resume modest growth in the year ahead. We're still likely to see minimal gains in manufacturing output."

The latest results are consistent with the Institute for Supply Management's factory survey, which showed manufacturing expanded at a modest pace in September after unexpectedly shrinking the prior month.

Manufacturing accounts for about 12 per cent of the economy. Economists' estimates for factory output in the Bloomberg survey ranged from a decline of 0.2 per cent to an advance of 0.4 per cent. The August reading was previously reported as a 0.4 per cent decrease.

For total industrial production, the Bloomberg survey median called for a 0.1 per cent advance, with estimates ranging from a drop of 0.2 per cent to an advance of 0.5 per cent. The prior month was previously reported as a decline of 0.4 per cent.

Mining production, which includes oil drilling, increased 0.4 percent, reflecting stabilization in the price of oil and other commodities. Oil and gas well drilling output rose for a fourth month, gaining 5.1 percent in September.

Utility output dropped 1 percent, after a 0.3 per cent decline the previous month, the Fed report showed.

Capacity utilization, which measures the amount of a plant that is in use, rose to 75.4 per cent from 75.3 per cent in the prior month.

Consumer goods production expanded 0.2 per cent, while output of business equipment decreased 0.2 per cent. Construction materials climbed 0.8 per cent after a 1.4 per cent drop.