Industrial Production Takes Its Biggest Dive In 9 Months
Friday, November 16th 2007, 8:55 am
By: News On 6
WASHINGTON (AP) _ Industrial production plunged in October by the largest amount in nine months, reflecting a big drop in utility output and continued troubles in autos and housing-related industries.
The Federal Reserve said that output at the nation's factories, mines and utilities fell by 0.5 % last month, a much worse outcome than had been expected.
The October decline, the biggest since a similar drop in January, was led by a sharp plunge in output of electricity and natural gas due to warmer-than-normal weather during the month.
Also contributing to the weakness was the third straight drop at auto factories and further weakness at industries producing lumber, appliances and other products tied to housing.
Auto makers are struggling with slumping demand in the face of soaring gasoline prices while housing is enduring its worst slump in more than two decades.
Analysts believe that the economy will slow significantly in the current quarter and the first three months of next year, with many raising the odds for a recession.
The Federal Reserve has cut interest rates twice since September but Federal Reserve Chairman Ben Bernanke sought to lower expectations for further rate cuts to boost economic growth. He said that Fed policymakers see the risks of weaker economic growth as roughly balanced with the risks of higher inflation that could be triggered by the latest surge in oil prices. That surge pushed the price of a barrel of crude oil briefly above $98 per barrel last week.
Still, many analysts believe that if the economic slump worsens, the Fed will cut interest rates again, possibly as soon as its next meeting on Dec. 11.
Manufacturing output fell by 0.4 % in October, the biggest drop since a 0.4 % decline in August.
Output at the nation's utilities was down 1.6 %. Mining output, a category that includes oil production, fell 0.6 %.
The declines left factories, mines and utilities operating at 81.7 % of capacity last month, down from an operating rate of 82.2 % in September.