US industrial output rises 0.7% in September, beating estimates

• The prior month's figure was initially reported as 0.0% and later revised upward to +0.1%.
• Capacity utilization stood at 76.9%, exceeding the 76.5% prediction.
• Manufacturing output rose 0.3%, matching forecasts.
• The previous manufacturing output reading was revised from -0.3% to -0.2%.

• Mining output increased 0.2%.
• Utilities gained 3.5%.
• Machinery rose 1.4%, primary metals 1.6%, electrical equipment 1.3%, and chemicals 1.0%.

The top-line number was boosted by utilities. Electric utility output increased 3.7% month over month and 9.6% year over year, while the sector's operating rate gained 2.3 percentage points to 73.8%. Weather may have contributed, but the year-over-year trend mirrors data center demand. Utility output expanded at a 14.8% annualized pace in the third quarter.

Manufacturing shows a split story:

• Semiconductor output increased 2.1% month over month and 19.9% year over year. Its third-quarter annualized growth of 28.4% accounted for most of the 3.8% rise in durables.
• Excluding high-tech, factory output inched up just 0.2% monthly and 0.7% yearly.
• Motor vehicles and parts slid 3.0%, as vehicle output fell 5.4%. Assemblies fell to an annual rate of 10.21 million from 10.61 million in August and 11.0 million in May. Output excluding autos rose 0.5%.

AI is making pervasive inroads across the economy and obscuring underlying trends elsewhere. Regrettably, monetary policy is a coarse tool, and raising interest rates to curb inflation will weigh heavily on the rest of the economy, including the struggling motor vehicle segment and the broader manufacturing sector outside high technology. Fiscal austerity would be a more suitable response, but that is not anticipated.