U.S. Industrial Production Falls 1.8%

Manufacturing drops 2.5%

Industrial production fell 1.8% in January. Output in January was 10% below its year-earlier level. Production in the manufacturing sector dropped 2.5%. A plunge in motor vehicle and parts production that resulted from extended plant shutdowns subtracted more than 1.0 percentage point from the change in manufacturing production.

The output of motor vehicles and parts decreased at a monthly rate of 23.4% in January, after having contracted at an annual rate of more than 37% in the fourth quarter.

The factory operating rate moved down 1.7 percentage points, to 68%, the lowest rate of utilization since this series began in 1948.

"Eighteen of the 20 major manufacturing industries declined in January. Another way to put the severity of this manufacturing recession in perspective is that in the last 12 months, from January 2008 to January 2009, manufacturing industrial production declined 12.9% -- this 12-month decline is the worst since June 1975 when production was off 13.7% in a 12-month period," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "A major inventory realignment is underway in manufacturing as firms shed formerly scarce commodities that have collapsed in prices and struggle to convert excess inventory into scarce cash reserves. The next few months will unquestionably be difficult, but the end result of inventory destocking we feel."

In January, consumer durable goods fell 10.5%, consumer non-energy nondurable goods declined 0.4%, and consumer energy products increased 1.2%. The production of home electronics moved down 1.3%, and the indexes both for appliances, furniture, and carpeting and for miscellaneous goods dropped 2.3%. The index for consumer chemical products decreased 1.1%, and the index for paper products moved down 1.6%.

The output of business equipment dropped 3.7%. The production of industrial and other equipment contracted 3%, and the production of transit equipment fell 11.7%. The index for information processing equipment was little changed after having posted steep declines in the second half of 2008. In January, higher output of some types of communications equipment offset declines elsewhere.

Capacity utilization rates in January at industries grouped by stage of process were as follows: At the crude stage, utilization decreased 0.8 percentage point, to 83.9%, a rate 2.8 percentage points below its 1972-2008 average; at the primary and semifinished stages, utilization moved down 1.2 percentage points, to 70.4%, a rate 11.7 percentage points below its long-run average; and at the finished stage, utilization declined 1.6 percentage points, to 69.3%, a rate 8.3 percentage points below its long-run average.

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