U.S. September Industrial production Drops By Most Since 34 Years, Down By 2.8%

Washington, D.C. (AHN) - Industrial production declined in the month of September to the lowest level in almost 34 years, due to the Gulf Coast Hurricanes and more than a month long strike at Boeing severely curtailed output.

Additional pressure on the manufacturing sector comes from the deteriorating credit market condition.

Industrial production dropped by a seasonally adjusted 2.8 percent in September, led by decline in production at factories, mines and utilities, according to a report released by the Federal Reserve in Washington on Thursday.

The market analysts had expected the production to decline by 0.8 percent, following prior month's drop of 1.1 percent.

The report showed manufacturing production, accounting for around four-fifths of industrial output, declined by 2.6 percent, compared to its drop of 0.9 percent in August.

The output of mines plunged 7.8 percent, mainly because crude oil and natural gas operations in the Gulf of Mexico were suspended due to hurricanes Gustav and Ike.

The Fed estimate the effect of the disruptions from the hurricanes on total industrial production last month of around 2.25 percentage points. The strike in the commercial aircraft industry caused an estimated of 0.50 percentage point to the overall drop in industrial production.

While, the output of utilities rose 2.2 percent, on temperatures returning to normal levels in September after a relatively cool August, when its output dropped by 3.1 percent, the report said.

The output of consumer products declined by 1.4 percent last month. Durable goods production moved down by 0.7 percent, while nondurable goods slipped by 1.5 percent.

The reports said that since the industrial production has declined sharply, the National Bureau of Economic Research (NBER), which determines if the U.S. economy entered a recession or not, may vote to state the current U.S. economy to be in recession.

However, industrial production is one of the four factors -- others include employment rate, personal income index and retail and wholesale sales of finished products -- that would help the Cambridge, Massachusetts-based arbiter of economic cycles to declare that the economy is in recession.