U.S. industrial output rebounded in October after hurricane disruptions produced a stunning fall in September, but early data suggested manufacturing would suffer this month, according to reports on Monday.
U.S. industrial production rose by a stronger-than-expected 1.3 percent in October after a downwardly revised September drop of 3.7 percent — the biggest fall in more than 62 years, according to a Federal Reserve report on Monday.
However, one of the earliest monthly guideposts to U.S. factory conditions showed manufacturing New York state tumbled in November to yet another record low, providing new evidence that the credit crisis was tightening its grip over the economy.
"The early signs suggest that the November data cycle is likely to be extremely weak," analysts at RDQ economics said in a research note.
On Wall Street, stocks opened lower as expected, while government bonds remained mixed. The dollar pared its losses against the yen after the industrial output data.
Economists polled by Reuters had expected an industrial output rise of just 0.2 percent in October, following an initially reported 2.8 percent fall in September.
The September fall in industrial output was the steepest since a 5.0 percent decline in February 1946.
The Fed said the revision to September output resulted, in part, from a larger estimate of the impacts that Hurricanes Gustav and Ike had on the chemical industry.
"EMPIRE" STRICKEN
In a separate report, the New York Fed said its "Empire State" general business conditions index fell to minus 25.43 from minus 24.62 in October. That was the lowest since the inception of the index in July 2001.
The report "paints a dim picture," said David Ader, head of government bond strategy at RBS Greenwich Capital in Greenwich Connecticut.
"Still, this is not exactly surprising but more confirmation and so not having much of an influence on price action (in the bond market) this morning," Ader added.
Economists polled by Reuters had expected an even weaker reading of minus 26.10.
The report, based on a survey of manufacturers in New York state, was generally bleak. The indexes for new orders and shipments slid to record lows, while the measures for unfilled orders, employment, and inventories all slipped to their lowest levels since late 2001.
As with many recent reports, the one silver lining was that inflation measures fell, which should give the Federal Reserve leeway to continue holding interest rates low as it fights the effects of the worst financial crisis in 80 years.
The prices paid index fell for the fourth straight month, and the prices received index tumbled to its lowest level in more than three years, the report said.
Respondents were also asked about cash holdings and debt financing. Just 20 percent of respondents reported that their cash balances were higher than usual, while 30 percent reported unusually low balances — about the same proportions as in an identical poll conducted last year as part of the November 2007 survey, the report said.
In November, 38 percent of respondents reported tightening credit standards, up from 25 percent in October's survey.
Among those reporting tightening credit the most widely cited effect was reduced capital investment, followed by workforce cuts, a shorter workweek, and delays in payments to vendors, the report said.
