Nov 17, 12:12 PM EST

US manufacturing output rises for first time in 3 months

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AP Photo/Keith Srakocic

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WASHINGTON (AP) -- U.S. manufacturing output rose in October for the first time in three months as factories cranked out more steel, cars and computers.

Manufacturing production increased 0.4 percent last month, the Federal Reserve said Tuesday, after slipping 0.1 percent in September.

The rise suggests that manufacturers may be overcoming several headwinds they have faced for most of this year. Many retailers and wholesalers have been cutting back on their stockpiles after ordering too many goods this winter. That has weighed on output. And the strong dollar has cut into exports by making U.S. goods more expensive overseas.

Economists warned that the drag from the strong dollar will likely persist, particularly if the Federal Reserve begins raising interest rates later this year. Rising interest rates can make a currency more attractive to global investors, driving up its value.

"We doubt the October (data) marks the start of a sustainable rebound," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "But reports of the death of the sector have been exaggerated."

Steady consumer spending is likely helping offset some of the drags. Auto sales jumped 14 percent in October, putting the industry on track for what could be a record year. Ford Motor Co. estimates that total car sales may reach 17.4 million, slightly above the previous record of 17.35 million in 2001.

That's kept auto factories humming. Auto production rose 0.7 percent last month, after a solid gain in September.

Developers are also building more homes, apartments, offices, and other commercial buildings, which is boosting demand for many manufactured goods. Output of wood products, sand and gravel, and metal parts rose strongly last month.

The growth in output was broad and lifted many other sectors, including machinery, electrical equipment, chemicals and textiles.

Overall industrial production, which includes mining and utility output, fell 0.2 percent, after dropping by the same amount in September. Mining production fell 1.5 percent, dragged down by cutbacks in oil and gas drilling. Utility output plummeted 2.5 percent, largely because of warmer-than-usual weather.

Other data has also suggested factories may be picking up a bit. The Institute for Supply Management, a trade group of purchasing managers, said earlier this month that its measure of production in October rose for the first time since July.

And a gauge of new orders received by U.S. manufacturers rose strongly, the ISM said. That suggests output may rise in the coming months.

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