U.S. September Industrial Output Is Down 2.8%, the Biggest Drop Since Dec ’74.

The output of the nation’s factories, mines and utilities plunged 2.8% in September, the Federal Reserve said Thursday. This is the biggest decline in output since December 1974. The figures were weaker than forecast by economists surveyed by MarketWatch, who were looking for output to fall 1.5%. A strike at Boeing Co (BA)
had a negative impact on production, as did Hurricane Gustav and Hurricane Ike. The two hurricanes subtracted about 2.25 percentage points from output in September, the Fed said. Factory output fell 2.6%. Capacity utilization – a gauge of inflationary pressures — fell to 76.4% from 78.7%. Industrial output is down 4.5% in the past year. In the third quarter, production declined 0.6%.

Manufacturing Slumps by Most in Decades

Bloomberg is reporting Manufacturing Slumps by Most in Decades.

Industrial output fell 6 percent in the third quarter, the most since 1991, and a factory index for the Philadelphia region hit an 18-year low this month, Federal Reserve figures showed today. The Labor Department reported that for the first time in two years consumer prices didn’t increase for two straight months.

Today’s numbers give the Fed scope to lower interest rates again this month. Stocks slid and interest-rate futures showed rising expectations of a half-point cut in the Fed’s benchmark to 1 percent by policy makers’ next meeting on Oct. 29.

“The credit crunch is intensifying, and enough damage has been done to ensure the next couple of quarters will be much weaker,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “The pendulum has swung sharply to the downside risks to growth rather than inflation.”

The Fed Bank of Philadelphia’s general economic index plunged to minus 37.5 this month, worse than forecast and the lowest reading since October 1990, from 3.8 in September, the bank said today. Negative readings signal contraction. The index averaged 5.1 last year.

Homebuilder confidence slid this month to the lowest level since record-keeping began in 1985, a sign the crisis in credit markets may deepen the worst housing recession in a generation. The National Association of Home Builders/Wells Fargo index of builder sentiment decreased to 14, less than forecast, from 17 in September, the Washington-based association said today.

The Commerce Department said yesterday retail sales dropped in September by the most in three years.

Mattel Inc., the world’s largest toymaker, said this month that most of its holiday toys will cost less than $20 to help lure shoppers who are cutting back on spending.

Wal-Mart Stores Inc. said this month it will cut prices ahead of the holiday season, offering 10 items for $10 each.

In terms of the declines, Bloomberg is reporting the biggest drop since 1991 and MarketWatch since 1974. It appears the latter is using Industrial Output while the former is using Philadelphia Fed Region manufacturing.

In regards to the CPI, it will not be too much longer before the CPI numbers are negative year over year.

Mike “Mish” Shedlock
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