General Motors strike cuts US industrial output

A strike at General Motors plants led to a sharp drop in US industrial output last month. Other production was subdued too, but separate figures yesterday showed a rebound in consumer confidence this month compared to last, writes Diane Coyle.

The US bond market fell in reaction to the figures but shares on Wall Street clocked up another gain. The Dow Jones index was nearly 51 points higher at 6,363.68 by midday.

Shares had already set a record every day this week, passing the 6,300 mark on Thursday. Thanks to the signs that the economy is steering a safe course combining steady growth with low inflation - along with the markets' ideal election result, a Democratic President and Republican Congress - the Dow Jones index has ended higher every day so far this month.

Robert Rubin, the US Treasury Secretary, said yesterday that inflation would remain low despite the low jobless rate. "I don't see signs of inflation re-igniting," he said.

The 0.5 per cent fall in industrial output in October was the first drop for seven months. Most of it was due to lower production of GM cars and trucks, but output excluding autos and parts was 0.1 per cent down compared with the previous month.

Production at General Motors, the world's biggest manufacturer, was down 11 per cent during the month because of strikes in the US and Canada.

The Federal Reserve said that capacity use had fallen to 82.7 per cent, the weakest since March.

However, Robert Brusca at Nikko Securities said adjusting for the strike there had been only a small slide after several strong months.

"We will see a bounce back," he predicted.

There was some support for this view from the University of Michigan's consumer confidence indicator. It was reported to have recovered to 98.9 in November from 96.5 last month.

Industrial output in Japan is likely to grow 2.9 per cent this quarter, reaching a level 4.6 per cent higher than a year ago, according to the Ministry of International Trade and Industry.