WRAPUP 3-U.S. factory output shows signs of broadening beyond autos
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* Manufacturing output rises 0.3 percent in October * Weak mining, utilities hold down industrial production * New York state factory activity contracts in November By Lucia Mutikani WASHINGTON, Nov 15 (Reuters) - U.S. manufacturing output rose for a third straight month in October even as automobile assembly fell, suggesting a broadening in activity in a sector regaining momentum after hitting a speed bump early this year. While other data on Friday showed factory activity fell in New York state early this month, economists said that probably was a delayed reaction to last month"s 16-day partial shutdown of the federal government. "This (New York state) report does not provide any basis to be concerned about the broader outlook for manufacturing activity," said John Ryding, chief economist at RDQ Economics in New York. Manufacturing output increased 0.3 percent last month after edging up 0.1 percent in September, the Federal Reserve said. The increase, which matched economists" expectations, was despite a 1.3 percent fall in auto production. Auto assembly fell for the first time since July. Manufacturing output last month was supported by gains in the production of primary metals, furniture and computer and electronic products, among others. "The gains in non-motor vehicle-related production signals a broadening in the production base beyond motor vehicles, which has been the key driver for the U.S. manufacturing sector output in recent months," said Millan Mulraine, senior economist at TD Securities in New York. In a second report, the New York Federal Reserve said its "Empire State" index of business conditions fell to minus 2.21 this month from 1.52 in October. It was the first negative reading since May. A reading below zero indicates a contraction in factory activity in the region. Economists said the survey was not a good predictor of national manufacturing activity as a small amount of factory production took place in New York state. Manufacturing is regaining some steam after hitting a soft patch early in the year. With the Institute for Supply Management survey signaling strength in national factory activity and global trade data improving, economists expect manufacturing to accelerate in the months ahead. Stocks on Wall Street were trading higher, while the dollar was weaker against a basket of currencies as investors continued to digest remarks by Fed chair nominee Janet Yellen that the central bank"s accommodative policies would continue. U.S. Treasury debt prices were slightly weaker. INDUSTRIAL PRODUCTION DIPS Despite the rise in manufacturing output last month, overall industrial production slipped 0.1 percent, weighed down by declines at power plants and mines. Weather-sensitive utilities output fell 1.1 percent last month after surging 4.5 percent in September. Mining production contracted 1.6 percent in October, the first drop in seven months. The Fed attributed the fall to temporary shutdowns of oil and gas rigs in the Gulf of Mexico as Tropical Storm Karen approached. Last month, the amount of industrial capacity in use fell 0.2 percentage point to 78.1 percent. Industrial capacity utilization - a measure of how fully firms are using their resources - was 2.1 percentage points below its long-run average. Officials at the Fed tend to look at utilization measures as a signal of how much "slack" remains in the economy, and how much room growth has to run before it becomes inflationary. Economists said the fall in capacity utilization could stoke fears of disinflation and make it difficult for the Fed to scale back its massive monthly bond purchasing program. The lack of inflation pressures was underscored by a third report from the Labor Department showing import prices fell 0.7 percent in October as petroleum prices fell by the most in nearly 1-1/2 years. Prices excluding petroleum barely rose last month and were down 1.3 percent from a year ago. "With price growth slowing in the European Union and the U.S., central banks will find it harder to justify near-term reduction of stimulus," said Jay Morelock, an economist at FTN Financial in New York.
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