October Industrial Output in US Takes a Hit Due to Auto Worker Strike

In October, US industrial production experienced a more significant decline than anticipated, primarily attributed to the impact of an auto workers strike, as reported by the Federal Reserve on Thursday. The United Auto Workers (UAW) union concluded a six-week strike last month after reaching agreements with Detroit's major automakers on improved pay and working conditions.

The Federal Reserve's statement revealed a 0.6 percent drop in US industrial production for October, contrasting with a revised 0.1 percent increase in September. This figure fell below the expectations of economists surveyed by MarketWatch. The manufacturing output witnessed a 0.7 percent decline, primarily influenced by a 10 percent reduction in the production of motor vehicles and parts, directly affected by strikes at several major manufacturers.

Oxford Economics' lead US economist, Bernard Yaros, noted in a client communication that the UAW strike had a more substantial impact on industrial production than both he and the consensus had predicted. Among the major market groups, there was a mixed output, with the strike's influence causing a downturn in various categories. The index for consumer durables, for instance, plummeted by 5.8 percent.

Furthermore, the output of business equipment decreased by 0.5 percent due to a decline in the transit component. In contrast, the index for defense and space equipment marked its tenth consecutive monthly rise, according to the Federal Reserve.

Looking ahead, Yaros from Oxford Economics forecasted a decline in industrial production for the current and next quarters. He cited potential factors such as tighter lending standards hindering business investment, the adverse impact of a stronger dollar on exports, and a high-interest-rate environment undermining consumer spending on discretionary goods.