U.S. factory activity fell for the first time since June, pointing to weaker conditions in the sector amid weakening global demand and higher borrowing costs.
Factory output fell 0.6% last month, after an upwardly revised 0.3% gain in October, according to Federal Reserve data released on Thursday. The number missed. all estimates in a Bloomberg survey of economists.
Including mining and utilities, total industrial output fell 0.2% in November, compared with forecasts for a stagnation.
Manufacturing output is pulled by both durable and nondurable goods, including motor vehicles and parts as well as plastic and rubber products. Excluding cars, factory output still fell the most in six months.
Manufacturers have faced weaker demand as a result of changing consumer spending patterns and combined with higher interest rates. Branch contract in November for the first time since the pandemic began as new orders continued to fall and companies braced for lower output in the future, according to the Institute for Supply Management.
Separate data on Thursday from regional Federal Reserve banks showed manufacturing activity weakened in both the New York and Philadelphia areas more than expected. The latter measure of new orders fell to its lowest level since the start of the pandemic.
Utilities output rose 3.6%, the highest since January due to higher electricity usage while mining activity fell. Oil and gas well drilling fell 0.7 percent, the biggest drop since July 2020.
The Fed’s report also showed that capacity utilization at factories fell to 78.9% last month, the lowest level since June.
Inventories are also too high, causing many retailers to renew deep discount during the year-end shopping season. Separate data earlier this week showed that 4% of US small businesses plan to reduce inventories over the next three to six months, the highest level since April 2020.
Other metrics still point to flexible demand. Orders with US factories for business equipment strong recovery in October, according to the latest government data.
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