U.S. Industrial Production Falls 0.4%

July 15, 2009
Manufacturing output decreases 0.6%

After having fallen 1.2% in May, industrial production decreased 0.% in June, the Federal Reserved reported on July 15.

For the second quarter as a whole, output fell at an annual rate of 11.6%, a more moderate contraction than in the first quarter, when output fell 19.1%.

Manufacturing output moved down 0.6% in June, compared with a 1.2% drop in May.

"Manufacturing production fell at a 10.5% annual rate in the second quarter when compared to the first quarter of this year. Unfortunately, the industrial decline is many times worse than what the general economy experienced. Economists expect the government to report later this month that GDP declined at only a 2% annual rate in the second quarter," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.

"Manufacturing has taken the brunt of the downturn because the housing collapse, cuts in consumer discretionary spending on goods, and a full-fledged investment retreat was made worse by an major inventory drawdown," he added. "Fortunately, there are many signs that the economy is now starting to bottom out. The restart of auto industry factories in July is especially timely and should give much needed forward momentum to the industrial sector. We believe a turning point is near for the beleaguered manufacturing sector."

Production of durable goods fell 0.7%. The indexes for machinery; computer and electronic products; electrical equipment, appliances, and components; and motor vehicles and parts all posted decreases of more than 1%. Output increased for several industries, most notably for wood products, primary metals, and miscellaneous manufacturing. The gain of 1.7% for primary metals follows 10 consecutive monthly decreases for the industry.

The output of nondurable goods fell 0.4%. Declines in the indexes for food, beverage, and tobacco products; apparel and leather; paper; and chemicals were only partly offset by increases in the indexes for printing and support, petroleum and coal products, and plastics and rubber products.

The output of business equipment fell 0.8% in June. The production of industrial and other equipment and of information processing equipment declined, while the output of transit equipment was unchanged. Transit equipment fell in the second quarter after having increased substantially in the first quarter, when the output of aircraft rebounded from a strike. The output of defense and space equipment increased 0.8% in June.

The rate of capacity utilization for total industry declined in June to 68%, a level 12.9 percentage points below its average for 1972-2008.

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