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Industrial Output Plunges .4% in April : Economy: Automobile production, which was off 14% for the month, is blamed for sharp decline.

From United Press International

U.S. industrial output plunged 0.4% in April, due primarily to a sharp decline in automobile production, after registering a healthy gain in March, the Federal Reserve said today.

Private analysts had expected a decline of about 0.2%.

“It is consistent with all other economic data that point to weakness,” said Mickey Levy, chief economist for First Fidelity Bancorp in Philadelphia. “Things are very sluggish.”

The report also said American industry operated at 83% of capacity last month, a decrease of 0.5% from March.

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“A sharp drop in the production of motor vehicles and parts, affecting both consumer goods and business equipment, accounted for the April decline in industrial production,” the Federal Reserve said.

In March, industrial production increased by a revised 0.5% and factory operating capacity recorded a revised increase of 0.3 percentage point, the report said.

Motor vehicle production was off by 14% for the month. But excluding autos and parts, total industrial production remained unchanged in April, the Federal Reserve said.

The industrial production report “reflects a great deal of unusual conservatism on the part of the auto industry,” said economist Cynthia Latta of the private consulting firm DRI/McGraw Hill in Lexington, Mass.

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“Their policy in the past has been to produce, produce, produce and then push, push, push--and that hasn’t been too good for profits,” Latta said. “They have bitten the bullet this year.”

The 0.4% in output was the first since a January drop of 1% in the wake of December’s big freeze, which crippled all types of business activity across the United States.

“That decline is consistent with the very weak employment number (for April) that included a decline in manufacturing employment and hours worked,” Levy said.

But Latta suggested the economy “is a little weak, but not quite as weak as the 0.4 decline suggests.”

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By industry, manufacturing production was down 0.6% in April, production of durable goods--items made to last three or more years--was off 1%, and nondurable goods fell 0.1%.

“Apart from autos and trucks, production of durable consumer goods declined 0.7% owing mainly to a drop in output of appliances,” the report said. “The output of nondurable consumer goods remained sluggish in April.”


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