US Industrial Production: Rebound from hurricane Ida behind the positive numbers – Wells Fargo

The 1.6% increase in industrial production for October is partly a make-up for the 1.3% storm-related decline in September, explained analysts at Wells Fargo. They consider the enduring challenge for production is the supply chain crisis, something far more disruptive to output than a Hurricane.

Key Quotes: 

“Industrial production gained 1.6% in October more than making up for the 1.3% dip in September. The gain handily exceeded expectations and the Federal Reserve attributes half of the gain in October to recovery from the effects of Hurricane Ida. This makes intuitive sense as you look into the underlying details.
The largest overall increase within manufacturing industries was motor vehicle and parts production which shot up 11.0% in October. That would ordinarily be a remarkably outsized gain. However, coming on the heels of back-to-back monthly declines that sum to just over 10% in August and September, the big surge in October begins to feel more like a matter of just getting back on track.”

“In this context it is an immense frustration to firms that find themselves unable to put their plants and equipment to profitable use despite core capital orders having risen more in this cycle than any other in the past 20 years. Capacity utilization rose, but at just 76.4% it remains below it long run 30-year average of 78.4%.”

“The rebound from Hurricane Ida was also behind the pickup in mining production. After the Hurricane limited oil & gas production in the Gulf of Mexico for the first half of September, mining output jumped 4.1% in October and oil & gas drilling specifically rose 9.3%, the highest monthly gain since January. Every category of energy production moved higher during the month. For utilities, relatively warmer-than-usual weather in October was behind the 1.2% gain.”