U.S. Manufacturing Output Falls Again

By John S. McClenahen The Paris-based financial institution BNP Paribas has no doubts that the U.S. is in recession. But it wonders, in a November research report, when consumers will lead America out of recession and into economic recovery. Certainly in manufacturing, recovery is not yet happening. Output fell 1.2% in October, the most recent month for which data are available. Declines came in primary metals, autos, lumber, furniture, textiles and paper, reports the Federal Reserve Board, Washington. U.S. manufacturing output is now 7.3% below its level of October 2000. Utilization of U.S. factory capacity continued to fall in October, down one full percentage point from September to 73.1%, its lowest level since 1983. Meanwhile, a 0.3% decline in consumer prices during October leaves room for the Federal Open Market Committee (FOMC), the Federal Reserve unit that sets short-term interest rates, to make additional cuts. "The gradual ebbing of inflation, and inflation expectations, helps to justify the Fed's aggressive ease and could help to justify further rate reductions," says Maury Harris, chief U.S. economist at UBS Warburg, New York. The federal funds rate now stands at 2%, four-and-one-half percentage points below its level at the beginning of the year. The FOMC's next scheduled meeting is Dec. 11.

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