Thursday , October 19 2017

US factory output drops 0.1 pct in Sept – Budget gap shrinks

WASHINGTON, Oct 16, (AP): US manufacturing production fell for the second straight month in September as factories cranked out fewer appliances, computers, and electronics. Factory output declined 0.1 percent, the Federal Reserve said Friday, following a drop of 0.4 percent in August. Manufacturers also cut back on production of steel and other metals.

The decline suggests that a strong dollar, weak overseas economies, and cautious US consumers are holding back factory output. Many companies are also focused on reducing stockpiles that were built up in the spring by cutting back on orders for new goods.

Overall industrial production, which includes mining and utilities, fell 0.2 percent, also its second straight decline. Mining output plunged 2 percent as energy companies sharply reduced oil and gas drilling. Utility output rose 1.3 percent.

Factories have had a tough year and there is little sign of improvement any time soon. A strong US dollar and weak overseas growth have hammered US exports. The dollar has risen about 13 percent in value against other currencies in the past 12 months. That makes US products more expensive, and therefore less attractive, in other countries.

Overall industrial production has increased just 0.4 percent in the past year, its weakest showing since the Great Recession.

“In 2015 it has been one thing after another hammering manufacturing in almost everything except motor vehicles,” Michael Montgomery, an economist at HIS Global Insight.

Auto sales jumped nearly 16 percent in September from a year earlier and are at the highest level in a decade. That has boosted auto production, which 0.2 percent last month.

But outside of cars, Americans are spending cautiously. Retail sales have barely grown in the past two months. That’s left many businesses with warehouses full of unsold goods. With such large inventories they see little need to order new products.

Big overseas economies are grappling with slower or nonexistent growth, including China, Canada, Europe, and Brazil. Canada, the United States’ largest trading partner, is in recession.

China and Brazil had been critical sources of demand for American-made industrial machinery, such as mining trucks, construction equipment, and agricultural machines. Their economic slowdowns have hit sales and profits for companies such as Caterpillar and United Technologies.

Falling oil prices have also dragged down factory output. Crude oil prices, which were around $60 per barrel in the spring, have fallen to about $49. The decline has forced energy firms to curtail drilling, eliminating much of the need for new pipelines and equipment that had boosted factory orders in previous years.

A private survey earlier this month found that US manufacturing activity expanded last month at the slowest pace in two years. Measures of new orders and production also dropped sharply, suggesting weakness in manufacturing is likely to continue.

Also:

WASHINGTON: The US budget deficit in 2015 fell to its lowest level in eight years, spurred by gains in tax revenue that outpaced greater government spending. The Treasury Department said Thursday that the deficit in the just-completed 2015 budget year fell to $439 billion from $483 billion in 2014. It is equal to 2.5 percent of the economy, the smallest proportion since 2007, and below the average of the past 40 years.

The latest figures coincide with intensifying budget battles in Washington. Congress and the White House face an early November deadline to raise the nation’s borrowing limit. Lawmakers are seeking a separate agreement with the Obama administration on a budget to keep the government open past a Dec 11 deadline.

The past few years’ dwindling budget gaps are a sharp contrast to the ballooning deficits that emerged during the Great Recession. Government spending surged and tax revenue sank as 9 million Americans lost jobs, the number of people relying on unemployment benefits and other social programs soared and banks and automakers needed bailouts.

Those trends raised annual deficits above $1 trillion for the first four years of Obama’s presidency. In 2009, the deficit equaled nearly 10 percent of the economy, the largest proportion since World War II.

Since then, a slowly improving economy and annual spending caps agreed to in a 2011 budget deal have steadily reduced the deficit. It has declined for six straight years when measured as a percentage of the economy.

Roughly 2.8 million jobs were added in the 12 months that ended in September. Corporate profits also rose, boosting the government’s tax receipts. Revenue rose 8 percent in 2015 to $3.25 trillion and spending 5 percent to $3.69 trillion. Americans paid 6 percent more in income and Social Security taxes in 2015 compared with a year earlier. Corporate tax receipts rose 7.2 percent.

Health care programs drove some of the largest increases in spending. Medicaid, which pays for health services for the poor, reported expenses of $350 billion, 16 percent higher than in 2014. Much of that increase was attributable to greater enrollments under the Obama administration’s health care reforms.

Education spending jumped $30 billion, or 51 percent, driven by an increase in the financing of student loans. Earlier Thursday, Treasury Secretary Jacob Lew warned Congress that the government would bump up against its $18.1 trillion borrowing limit by Nov. 3, two days before an earlier estimate. Lew’s warning comes as closely held talks on the budget have yielded little evidence of progress. Some Republicans hope to win concessions in exchange for an increase in the debt limit, a prospect that is considered unlikely.

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