Industrial production stumbles
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WASHINGTON -- Industrial activity plunged in August, extending what is now the longest decline in factory output in three decades.
The Federal Reserve reported Friday that industrial production fell 0.8 percent last month, the 11th consecutive monthly decline, stifling hopes that manufacturers were about to turn a corner. Many economists had thought that July's tiny 0.1 percent drop in output might be signaling better days ahead.
"The manufacturing sector was in full retreat as we entered September and recent events will only make things worse," said Joel Naroff of Naroff Economic Advisors. Optimism that the country will be able to mount a sustained recovery in the second half of this year had already been dealt a blow by this week's attacks in New York and Washington, which brought a temporary halt to airline travel, shut down the stock exchanges and disrupted business nationwide.
"For the foreseeable future, the economy is clearly going to be weaker," said Sung Won Sohn, chief economist at Wells Fargo.
The 0.8 percent drop in industrial production brought the string of declines to 11, the longest stretch of weakness in about four decades, since an 11-month fall from February through December 1960. The weakness in industrial output in August was led by sizable decreases in production of autos and auto products and various consumer goods. Information processing equipment, a category that includes computers, was down 0.5 percent in August after an even larger 1.6 percent drop in July.
The declines in production left U.S. industry operating at just 76.2 percent of capacity in August, the weakest performance since July 1983.
In other economic news, retail sales showed a moderate gain of 0.3 percent despite the fact that auto sales dropped in August. After tumbling in July, wholesale prices climbed 0.4 percent last month as the cost of gasoline and other energy products jumped.
While price increases have been worse than analysts had been expecting, the core inflation rate -- which excludes the volatile energy and food sectors -- fell by 0.1 percent last month, the first drop since February.
Also, U.S. producer prices rose more in August than at any other time in the last four months, spurred by an increase in energy costs. The producer price index, which measures the costs paid to factories, farmers and other producers, rose 0.4 percent last month, the Labor Department said. That was higher than the 0.1 percent expected by analysts and followed a 0.9 percent decrease in July.
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