http://www.washingtonpost.com/wp-srv/aponline/20011016/aponline092354_000.htm

Industrial Production Plunges

By Jeannine Aversa, Associated Press Writer

Tuesday, Oct. 16, 2001; 9:23 a.m. EDT

WASHINGTON (AP)– Industrial activity plummeted in September, the 12th straight month of decline, as the terror attacks dealt a new blow to the nation's battered manufacturing sector.

The last time there was a string of 12 consecutive declines in industrial output was from November 1944 through October 1945.

Output at the nation's factories, utilities and mines fell by 1 percent last month, the worst showing since June, when industrial production declined by the same amount, the Federal Reserve reported Tuesday. That followed a 0.7 percent decrease in August.

Operating capacity sank to 75.5 percent in September, the lowest level since June 1983, as companies throttled back production in the face of sagging demand. Before the Sept. 11 attacks on the World Trade Center and the Pentagon, economists were hopeful that manufacturing, hardest hit by the more than yearlong economic slowdown, was on the verge of a rebound.

But the economic fallout from the attacks dashed those hopes and economists expect the industrial sector will continue to founder in the months ahead. The attacks temporarily shut down the airlines, hobbled business across the country and disrupted the flow of supplies to factories because of tightened security at the nation's border, particularly along the country's northern edge.

The shock of the attacks also sapped consumer demand, sending retail sales nationwide down sharply in September as people stayed glued to their TV sets and away from the stores.

In September, output at factories fell by 1.1 percent, on top of a 0.9 percent decline in August. Utilities saw output drop by 1.8 percent, after rising by 1.9 percent the month before. Production at mines rose by 0.3 percent, erasing a 0.3 percent drop in August. Production of cars and parts fell by 3.6 percent in September, after a 3 percent drop in August. The attacks had forced some car plants to close temporarily because of supply problems.

For the entire third quarter, industrial output declined at an annual rate of 6.2 percent, following a 4.4 percent rate of decline in the second quarter. The third-quarter performance was the weakest since the first three months of this year, when industrial output decreased at a rate of 6.8 percent.

Production of consumer goods, such as home appliances, dropped at a rate of 3.2 percent in the third quarter, the largest decline since the first quarter of 1991, when the country was suffering through its last recession.

To stabilize the economy, the Federal Reserve has cut interest rates nine times this year, with a full percentage point reduction coming in two moves after the attacks. President Bush and Congress are working on a plan to aid the economy, which is likely to include additional tax cuts and increased government spending.

Still, many economists say a recession this year is unavoidable. They predict that the economy, which grew at an anemic annual rate of just 0.3 percent in the second quarter, contracted in the third and fourth quarters. A recession is commonly defined as two consecutive quarters of shrinking gross domestic product, the total output of the nation's goods and services.

© Copyright 2001 The Associated Press

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