Implications:  Industrial production surprised to the upside in September, driven by broad-based gains across nearly every major category. Notably, industrial activity has been accelerating recently, rising at a 5.2% annualized pace in the past three months versus just 1.8% annualized over the past six months and 0.1% in the past year. The largest sub-component, manufacturing activity, rose 0.4% in September. Looking at the details, both auto and non-auto manufacturing contributed, rising 0.4% and 0.3% respectively.  Meanwhile, output in the mining sector increased 0.4% in September.  A faster pace of oil and other mineral extraction more than offset a decline in the production of natural gas.  With new geopolitical concerns in the Middle East and WTI crude prices that have recently surged back above $85 a barrel, we expect mining to continue to be a tailwind for industrial production in the near term. Meanwhile, the utilities sector (which is volatile and largely dependent on weather) was the one major source of weakness in September, posting a decline of 0.4%.  While welcome news for now, we expect industrial production to soon weaken due the lagged effects of tighter money.  In other recent factory news, the Empire State Index, a measure of New York factory sentiment, fell to -4.6 in October from 1.9 in September.  Finally this morning, the NAHB Housing Index, a measure of homebuilder sentiment, fell to 40 in October from 44 in September.  This is the third consecutive decline and coincides with a recent jump in mortgage rates.  An index reading below 50 signals that a greater number of builders view conditions as poor versus good.

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