Industrial production up 1.1% in October, but still lagging

U.S. industrial production rose 1.1% in October, recovering much of the spring decline caused by the virus pandemic.

It was a rebound after a downturn in September, but production still remains below pre-pandemic levels, the Federal Reserve reported Tuesday. The rise was slightly better than the 1% analysts were expecting and combined with an upward revision in September’s number, has to be seen as good news as coronavirus cases spike across the U.S. and states re-instate restrictions.

It’s unclear what manufacturers will face in the coming months, but a sudden decline in demand, possibly combined with government-imposed restrictions on their operations due to the virus, could severely dampen industrial output.

A key category that reflects manufacturing output rose 1%, but is still about 5% below its level in February before the coronavirus outbreak swept through the U.S., closing businesses, factories and schools.

In October, industry operated at 72.8% of capacity, down from a reading of 77% of capacity a year ago.

Despite the top-line gain that was in line with expectations, economists saw the October report as tepid and said future gains will depend largely on how the U.S. handles a third wave of infections, and whether it can will deliver a sorely needed aid package for Americans and American business.

“We expect industrial activity to continue recovering its pandemic-induced losses, but growth will be slower compared to the summer months,” said Oren Klachkin, an economist with Oxford Economics. “A rapidly deteriorating health situation poses significant downside risks to industrial activity, particularly if more fiscal aid isn’t delivered.”

Any hope for Congress to pass another aid package fizzled weeks ago in the leadup to the U.S. election and seems even more unlikely to happen before President-elect Joe Biden takes office.

The virus has killed more than 247,000 Americans this year and infected at least 11.1 million—about 1 million in the past week alone.

Utilities’ output rose 3.9 percent, but output at mines fell 0.6 percent and is now 14.4 percent below where it was this time last year.

September’s number was revised upward from -0.6% to -0.4%. It remains the only decline since April’s 12.7% drop.