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WASHINGTON, Nov 17 (Reuters) - U.S. industrial production rebounded by a stronger-than-expected 1.3 percent in October after a downwardly revised September drop that was the biggest fall in more than 62 years, according to a government report that is likely to reinforce fears of a recession.
The Federal Reserve on Monday attributed the October output rebound to a return to production of energy and chemical facilities shut down by Hurricanes Ike and Gustav in September.
These storm-related effects added 2 percentage points to output in October, so without them, industrial production would have fallen by around 0.7 percent, according to the Fed.
Compared with a year ago, October’s industrial output fell 4.1 percent.
“The rebound in production was driven entirely by the reversal of part of the impact of Hurricane Ike,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
“Excluding these factors the Fed reckons output fell 0.7 percent in both September and October, so the trend is clearly awful,” he added. “We are very disturbed to see no recovery at all in the dollar value of capital goods production which fell 7.8 percent in September and a further 2.5 percent in October.”
Stocks were lower in early trade, with the Dow Jones Industrial Average down 131 points to 8,365 as Japan slid into recession and Citigroup said it plans to shed 50,000 jobs. Treasury debt prices edged higher on a safe-haven bid while the dollar eased.
The United States is expected to technically fall into recession in the fourth quarter, with a deeper contraction in gross domestic product than the third quarter’s 0.3 percent drop.
Economists polled by Reuters had expected October industrial output to rise 0.2 percent in October, following an initially reported 2.8 percent fall in September.
But the Fed revised the September fall to 3.7 percent -- making it the steepest drop since a 5.0 percent decline in February 1946 as World War II production ended.
The Fed said the downward revision to September output resulted, in part, from a larger estimate of the impacts that Hurricanes Gustav and Ike had on the chemical industry, cutting two and a half percentage points from output.
A strike at aircraft maker Boeing Co BA.N reduced industrial output by a half-percentage point in September and a tenth of a point in October, the Fed said.
Meanwhile, total capacity utilization edged higher to 76.4 percent from a downwardly revised 75.5 percent in September.
The 1.3 percent rebound in October output was the sharpest increase since a matching rise in October 1999.
October’s manufacturing output rose 0.6 percent after a revised 3.7 percent fall in September, while October mining output rose 6.1 percent after an 8.5 percent fall in September. Utility output rose 0.4 percent in October after a 2.4 percent rise in September. (Editing by Andrea Ricci)
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