- WASHINGTON (AFP) - US industry
slashed output in September and entered its longest slide since World War
II as the terror attacks pounded an already sluggish economy, the Federal
Reserve said Tuesday.
US factories, mines and power plants cut production by 1.0 percent, the
12th monthly reduction in a row. It was the longest decline since a 12-month
slide that ended in October 1945.
In August, industrial output fell 0.7 percent.
Prospects for an economic recovery in early 2002, widely tipped by economists,
were also shrouded in uncertainty after the September 11 onslaught, the
Federal Reserve said.
"The nations industrial sector was hurting before September 11 and
it is hurting even more now," Naroff Economic Advisors president and
chief economist Joel Naroff said.
Over the year to September, industrial production had slumped 5.8 percent
in the month, he noted.
US factories operated at just 75.5 percent of their total capacity in September,
the lowest figure rate since June 1983, the Federal Reserve figures showed.
"Capacity utilization hit its lowest level in 18 years and is closing
in on the 1982 lows, and that will greatly depress the need for investment
in new plants or equipment," Naroff said.
Output in September fell in all major industries except mining, which edged
up 0.3 percent after falling by the same margin in the previous month,
the data showed.
Motor vehicle production slumped 3.6 percent in September, compounding
a 3.0-percent decline in August.
At power and other utilities, production fell 1.8 percent in September,
compared with a 1.9-percent increase the previous month.
Production of computers, communications equipment, and semiconductors --
a broad measure of the high technology sector -- slumped 2.4 percent in
the month after 1.0-percent decline in August.
Manufacturing output fell 1.1 percent in September after declining 0.9
percent in August.
"No doubt an important portion of the September decline was due to
lost production time in the wake of the attack," said Wachovia Securities
chief economist David Orr.
"Were that the only problem, a fouth-quarter rebound could be expected,"
he said.
But retail inventories were climbing before the attacks, Orr said.
"Although there have been some positive reports from shopping malls
and hotels in recent days, it still seems inevitable that the spike in
job losses in recent months has begun another round of cutbacks in sales,
orders, and output -- the classic self-reinforcing process that defines
a recession," he warned.
Federal Reserve Board Vice Chairman Roger Ferguson added to the grim picture,
warning in a speech in New York that forecasts of a recovery in early 2002
may be premature.
The terrorist onslaught disrupted sales, air travel, and production, while
also affecting the attitudes and expectations of consumers and businesses,
Ferguson said.
"Many private sector economists are forecasting a brief decline in
economic activity during the second half of this year, followed by a recovery
early next year," he added.
"Whether this outlook becomes reality depends importantly on the aforementioned
household and business confidence."
People might cut back in consumption and businesses might curtail investment
as they worried about the direction of the economy, Ferguson told a Bond
Market Association conference.
"However, opposing these contractionary impulses, should they occur,
will be a more expansionary fiscal policy," he said. "Moreover,
monetary policy has been and will continue to be responsive to rapidly
changing circumstances."
The Federal Reserve has slashed interest rates twice since the attacks,
each time by half a percentage point, bringing the key federal funds target
to a 39-year low of 2.50 percent.
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