U.S. Industrial Production Declines

May 15, 2008
Strikes in the auto industry contributed to decline

After having risen 0.2% in March, industrial production declined 0.7% in April, the Federal Reserve reported on May 15.

Manufacturing output fell 0.8% in April. As was the case in March, factory output in April was held down by a large drop in the index for motor vehicles and parts; strikes and strike-related parts shortages resulted in suspended production at many facilities. Excluding motor vehicles and parts, manufacturing production fell back 0.4% after having increased 0.3% in March.

The production of durable goods fell 1.4% after having been unchanged in March. In addition to the motor vehicles and parts industry, the durable manufacturing industries that registered decreases in output of more than 1% in April included nonmetallic mineral products, fabricated metal products and machinery. In contrast, the output of computer and electronic products moved up more than 1% for the third consecutive month. The index for nondurable manufacturing edged down 0.1%; sizable reductions occurred in the indexes for textile and product mills, printing and support, and plastics and rubber products. The output of petroleum and coal products rose.

The rate of capacity utilization for total industry declined 0.7 percentage point, to 79.7%, a level 1.3 percentage points below its average for 1972-2007.

The 0.7% decline in April industrial production and 0.8% reduction in manufacturing production is conclusive evidence that the industrial side of the U.S. economy is in a recession, said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. The decline in the April figure reflects major production declines in housing materials, motor vehicles and machinery plus the general weakness feeding back into a broad array of manufactured components and inputs. Furthermore, the recent surge in grocery prices has slowed demand for food.

As bad as the industrial downturn may seem, the decline in the value of the dollar and subsequent surge in export orders is a cushion for the manufacturing sector, he added. U.S. manufacturers are able to tap strong foreign demand through exports and offload some of our weakness to foreign competitors through depressed import demand.

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