- Industrial production rose in November with the end of the auto strike but is down over the past year.
- High interest rates continue to weigh on the industrial sector.
- PNC expects a decline in industrial production in 2024.
Industrial production rose 0.2% in November from October, according to the Federal Reserve. This followed a 0.9% drop in October, revised lower from a 0.6% decline. The biggest factor driving industrial production over the past couple of months has been the United Auto Workers strike, which ended in late October. Output of motor vehicles and parts fell 9.9% in October, before increasing 7.1% in November. Overall manufacturing production rose 0.3% in November, after a 1.1% decline in October. Excluding motor vehicles and parts manufacturing output fell 0.2% for a second straight month in November.
Mining production rose 0.3% in November after falling more than 1% in October. Utilities output fell for a third straight month in November, down 0.4%.
On a year-over-year basis total industrial production was down 0.4% in November, including a 0.8% decline for manufacturing.
The capacity utilization rate rose slightly to 78.8% in November from 78.7% in October. The manufacturing rate rose 0.2 percentage point over the month to 77.2% with the end of the UAW strike.
Although industrial production rose in November from October, this improvement was driven by the end of the auto strike and not underlying strength in the industrial sector. Industrial production in November was down 0.6% from September, before the UAW strike, with manufacturing output down 0.4% over this period. Overall industrial and manufacturing output have declined slightly over the past year as higher interest rates have weighed on the economy. This slowing in manufacturing output has been somewhat offset by an increase in mining production, as high energy prices in late 2022 and early 2023 drove exploration and development.
Industrial production is set to decline further in 2024. High interest rates will continue to weigh on housing-related, consumer durable goods, and business equipment industries. The recent drop in oil prices will reduce mining output. Even if the U.S. economy does not enter a recession, industrial output will continue to decline in the near term. The ongoing decline in capacity utilization will contribute to slowing inflation in 2024.
