Industrial output, capacity utilization up in October

WASHINGTON (Reuters) - U.S. industrial output rose more than expected in October as factory and mining production expanded strongly, suggesting the economy was gaining steam.

Industrial production rebounded 0.7 percent last month, the Federal Reserve said on Wednesday, after slipping 0.1 percent in September. October’s increase was the largest since July.

Economists polled by Reuters had expected industrial production to rise 0.4 percent last month after a previously reported 0.2 percent gain.

Manufacturing expanded 0.5 percent after rising 0.3 percent in September. The gain reflected a 3.1 percent jump in the production of motor vehicles and parts.

Although manufacturing accounts for about 12 percent of gross domestic product, the sector has shouldered the economy’s recovery and October’s industrial production report pointed to resilience in factory activity.

Mining output surged 2.3 percent, more than reversing September’s 0.5 percent drop. Utilities fell 0.1 percent, declining for a third straight month.

Capacity utilization, a measure of how fully firms are using their resources, rose to 77.8 percent from 77.3 percent in September. That was 2.1 percentage points above its level from a year earlier, but 2.6 percentage points below the 1972-to-2010 average.

Analysts were expecting capacity use to rise to 77.6 percent.

Officials at the Fed tend to look at utilization measures as a signal of how much “slack” remains in the economy -- how far growth has room to run before it becomes inflationary.

Reporting by Lucia Mutikani, Editing by Chizu Nomiyama