By STEVE GOLDSTEIN / Marketwatch
WASHINGTON – Industrial production slipped in September, the first drop after six months of gains, according to data released by the Federal Reserve on Monday.
Production slipped 0.2 percent compared to August, though it was up 5.4 percent from the September 2009. Economists polled by MarketWatch had expected a 0.2 percent increase.
Stocks rose Monday nonetheless, helped by strong quarterly results from Citigroup and a separate report showing home builders’ confidence rose for the first time in October in five months.
“U.S. manufacturing output contracted by 0.2 percent in September, illustrating that the previously robust recovery in the factory sector is definitely behind us now and this could even be the start of a renewed downturn,” said Paul Ashworth, senior U.S. economist at Capital Economics.
Indexes of production from April to August were each revised lower by marginal amounts.
The biggest drag on September output came from appliances, furniture and carpeting as well as from energy, both of which saw 1.9 percent decreases.
For the third quarter as a whole, U.S. industrial production rose at an annualized 4.8 percent rate, slower than the approximately 7 percent growth seen during the first and second quarters of the year. Manufacturing production decelerated sharply in the third quarter.
Ashworth noted that business-equipment production rose just 0.1 percent – demonstrating that after the release of pent-up demand, the growth rate of business investment has slowed.
Housing index rises
The National Association of Home Builders/Wells Fargo housing market index rose 3 points to 16 in October to bring the gauge to the same level as June. Economists polled by MarketWatch expected the gauge to remain stuck at 13.
All three of the index’s components – current sales conditions, sales expectations and traffic of prospective buyers – rose.
The report measures confidence in the market for newly built, single-family homes. Any number over 50 indicates that more builders view conditions as good than poor. The housing market index hasn’t been above 50 since April 2006.
“The new-homes market is finally moving past the lull that occurred when the home buyer tax credits expired and economic growth stalled this summer,” said NAHB Chief Economist David Crowe in a statement.
“While challenges such as competition from foreclosures, inaccurate appraisal values and general consumer uncertainty about the economy and job market continue to be major factors, builders have seen a slight increase in consumers who are considering a home purchase. The toughest obstacles really come down to financing … the scarcity of construction credit for builders along with tougher mortgage requirements for consumers.”