MANUFACTURING activity plunges for ninth month in a row
Tuesday, July 17th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Manufacturing activity plummeted in June, the ninth straight monthly decline, providing fresh evidence that the battered industrial sector continues to bear the brunt of the yearlong economic slowdown.
The Federal Reserve reported Tuesday that industrial production at the nation's factories, mines and utilities declined by 0.7 percent last month, following a 0.5 percent drop in May.
June's decline was the sharpest since industrial output fell by 0.9 percent in January.
On Wall Street, stocks were mixed. The Dow Jones industrial average was up 36 points at late morning and the Nasdaq index was off 1 point.
The latest snapshot of the industrial sector's performance was weaker than many analysts were expecting. They were predicting manufacturing activity would fall by 0.5 percent in June.
Operating capacity, meanwhile, sank from 77.6 percent in May to 77.0 percent in June as companies throttled back production in the face of sagging demand. That was the worst showing since August 1983.
To stave off recession, the Federal Reserve slashed interest rates six times this year. The rate reductions lower borrowing costs and are aimed at generating consumer spending and business investment, which would rejuvenate economic growth.
Fed Chairman Alan Greenspan on Wednesday will provide Congress with his twice-a-year report on the economy. Many analysts believe he will deliver a cautiously optimistic assessment and that he may signal that the Fed's latest credit-easing campaign may be coming to a close. Still, analysts believe Greenspan won't close the door on another interest rate cut in the future.
Tuesday's report showed that output at factories fell by 0.8 percent in June, after a 0.5 percent decline. Production of big-ticket items manufactured goods, such as cars, posted the sharpest decline.
Mining production fell by 0.4 percent in June, after a 0.1 percent decline. But output at gas and electric utilities rose by 0.9 percent, following a 1.7 percent drop in May.
For the April-June quarter, total industrial output fell at an annual rate of 5.6 percent, following a 6.8 percent rate of decline registered in the first quarter.
Recent economic data have offered mixed signals on the industrial sector, which many believe is in a recession of its own.
Earlier this month, the National Association of Purchasing Management reported that a key gauge of industrial activity in June turned in its best performance in seven months. Even with the improvement, the measure was at a level indicating that the manufacturing sector of the economy remained in recession.
The group's purchasing index rose to 44.7 percent from 42.1 percent in May. An index above 50 signifies growth in manufacturing, while a figure below 50 shows contraction. June's 44.7 percent reading was the highest since 47.9 percent in November.
At the time, analysts were heartened that the index regained some lost ground and were hopeful that the worst of the manufacturing recession may be over.