Factory Output in U.S. Dipped 0.7% in October : Economy: California’s earthquake, an aircraft industry strike and the Fed’s tight-money policy take their toll.

Industrial production fell 0.7% in October, due in part to a strike in the aircraft industry and the effects of the California earthquake, the government said today.

The Federal Reserve Board said October’s drop followed no change in September’s output and a 0.3% gain in August.

The decline had been expected following the Labor Department’s report earlier this month that the manufacturing sector had lost 13,000 jobs in October. At the same time, the department reported a drop in the average manufacturing work week and said overtime was virtually non-existent.

The manufacturing sector has been among the hardest hit by the Fed’s tight-money policies as the central bank tries to contain inflation by slowing the economy without tipping it into a recession.

“The October decline largely reflected a strike in the aircraft and parts industry and some production disruptions, particularly in computers and related parts, resulting from the recent earthquake in California,” the Federal Reserve said.

“Excluding these effects, the total index would have been nearly unchanged in October, continuing its recent sluggish trend.”

In another report, the Fed said the operating rate of the nation’s factories, mines and utilities fell 0.8 of a percentage point to 82.8% in October, reflecting the decline in the production rate. The operating rate measures not only output but also changes in productivity levels.

Factory use had dipped in September to 83.6% from 83.8% in August. The rate posted 10-year highs of 84.3% last December and January.