US industrial production falls

US industrial production unexpectedly dropped in November for the first time in seven months, an indication of a pause in manufacturing as 2011 comes to a close.

Output at factories, mines and utilities declined 0.2 per cent after a 0.7 per cent gain in October, figures from the Federal Reserve showed on Thursday. Economists forecast a 0.1 per cent advance, according to the median estimate in a Bloomberg News survey. Factory production, which makes up 75 per cent of the total, decreased 0.4 per cent, also the first decline since April.

A slowing economy in Europe may limit shipments from American manufacturers and restrain the industry that’s been a source of strength for the recovery. While lean inventories point to sustained production, on Thursday’s figures underscore Fed policy makers’ comments this week that business investment is beginning to cool.

“Manufacturing still appears to be growing, albeit slightly less than it was in the third quarter,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut. “Part of the weakness reflected a cut in motor vehicles and parts.”

Estimates of the 82 economists surveyed by Bloomberg ranged from a decrease of 0.5 per cent to an increase of 0.5 per cent.

Stocks climbed after a report showed jobless claims declined to a three-year low.

The Standard & Poor’s 500 Index rose one per cent to 1,224.07 at 9.51 am in New York.

The labour department said the number of applications for unemployment benefits dropped by 19,000 to 366,000 in the week ended December 10.

Capacity utilisation
Capacity utilisation, which measures the amount of a plant in use, fell to 77.8 per cent from a revised 78 per cent in October that was higher than previously estimated. The reading compares with the 79.5 per cent average over the past 20 years.

On Thursday’s industrial production report showed factory output decreased after increasing 0.5 per cent in October. Manufacturing accounts for about 12 per cent of the US economy.

The output of motor vehicles and parts declined 3.4 per cent, erasing the prior month’s entire gain, on Thursday’s report showed. Manufacturing excluding autos and parts dropped 0.2 per cent following a 0.3 per cent October rise.