Economy Watch: U.S. Industrial Production Ekes Out Gain

A recent Federal Reserve report revealed modestly good news for industrial real estate, especially for those properties handling U.S.-produced goods slated for export.

industrial stockU.S. industrial production edged up 0.1 percent in September after falling 0.5 percent in August, the Federal Reserve reported on Monday. For the third quarter as a whole, industrial production rose at an annualized rate of 1.8 percent, scoring its first quarterly increase since the third quarter of 2015.

Manufacturing output (a subset of total industrial production) increased 0.2 percent in September and moved up at an annualized rate of 0.9 percent in the third quarter, according to the Fed. Also, capacity utilization for the industrial sector edged up 0.1 percentage point in September to 75.4 percent, a rate that’s nevertheless 4.6 percentage points below its long-run (1972–2015) average.

On the whole, this data constitutes a bit of modest good news for industrial real estate, especially those properties that handle U.S.-produced goods slated for export. Domestic manufacturing has taken a hit in recent years, particularly as the dollar has grown strong, and demand from markets like China, whose goods move through West Coast industrial markets, has grown weaker.

Separately, the Port of Long Beach reported on Monday that container volumes through the port declined 16.6 percent year-over-year in September, but that was a temporary aberration, due to the effects of the Hanjin bankruptcy reaching West Coast ports. Port officials said the number of containers handled during September was impacted not only by reduced calls from Hanjin-operated ships, but also by the absence of Hanjin containers on other vessels.

Container traffic is a useful metric that illustrates the volume of goods being exported and imported. L.A.-area ports handle about 40 percent of U.S. container port traffic.