Output fell last month 0.1% October drop is unexpected, but the 4th in 5 months

Utilities, mining slow

Turmoil abroad lowers demand, and many prices

The economy

November 17, 1998|By BLOOMBERG NEWS

WASHINGTON -- U.S. industrial production declined in October, the fourth drop in five months, the Federal Reserve reported yesterday.

Industrial production unexpectedly fell 0.1 percent last month, reflecting falling production at utilities and mines, and a small rebound from the previous month's drop in factory output, the Fed said. In September, industrial production fell 0.5 percent.

The plant-use rate, which tracks the amount of industrial capacity in use, declined for the third month in a row. The drop to 80.6 in October from 81.0 in September was the lowest reading since September 1992. Economists were expecting a 0.2 percent rise in October production and a plant-use rate of 81.0 percent.

While manufacturing output rose 0.3 percent last month, that followed a 0.6 percent decline in September. "The trend is flat at best," said Astrid Adolfson, an economist at MCM MoneyWatch in New York.

Industrial production fell 0.1 percent during the July-September quarter, its weakest showing since an 8-plus percent decline during the first quarter of 1991.

Economic turbulence in Asia and in emerging markets elsewhere has depressed demand and led to lower prices for a variety of industrial goods and commodities, ranging from computer chips and oil to iron and steel.

The dollar's strength against the yen, meantime, has pushed down import prices for U.S. consumers, intensifying price competition in heavy industry. Production of nondurable goods has declined for three straight months. "Manufacturing is continuing to suffer," said Kevin Flanagan, an economist at Morgan Stanley Dean Witter in New York. "It can become a drag on other sectors of the economy."

Yesterday's Fed report showed factory production of durable goods rose 0.6 percent last month, after declining 0.9 percent in September. Nondurable goods production fell 0.1 percent after declining 0.3 percent.

Among manufacturers, auto and truck production increased 4.2 percent last month, the Fed said. Household appliance production rose 1.2 percent. Construction supplies production increased 0.4 percent. Business equipment production, including computers, rose 0.2 percent.

Mining output fell 1.1 percent, after a drop of 1.0 percent in September. That's the third straight monthly decline. Output at utilities decreased 3.4 percent as temperatures returned to more normal levels, after rising 1.5 percent in September.

Pub Date: 11/17/98

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