WASHINGTON - Industrial production unexpectedly declined in October as superstorm Sandy knocked out power in the Northeast.
Output at factories, mines and utilities dropped 0.4 percent last month after a revised 0.2 percent increase in September that was smaller than previously estimated, Federal Reserve data showed Friday. Economists had forecast a 0.2 percent gain, according to Bloomberg News. The Fed said the storm cut total production by almost 1 percentage point.
American factories, a source of strength for much of the three-year expansion, face a persistent challenge from Europe's recession and slower growth in Asia. Further cutbacks in capital spending by companies concerned about the possibility of $607 billion in automatic tax increases and spending reductions next year represent another hurdle for the industry.
"Manufacturing is still not the source of economic energy that it was earlier in the year," said Ward McCarthy, chief financial economist of Jefferies & Co. "It's a sluggish story on manufacturing. It's not where it was."
Manufacturing, which makes up 75 percent of total production, slumped 0.9 percent last month, matching August as the biggest decrease since May 2009. Factory output excluding the effects of Sandy was about unchanged in October from the prior month, the Fed said.
Estimates of the 84 economists surveyed by Bloomberg for overall production ranged from a 0.3 percent decrease to a 0.6 percent gain. September's figure had previously been reported as a 0.4 percent increase.
Output at utilities fell 0.1 percent in October after no change in September, Friday's data showed. The largest estimated storm-related effects included production cutbacks in utilities, chemicals and electronics, the Fed said.