June Industrial Activity Down 0.7% in 9th Straight Month of Decline

Manufacturing activity plunged in June for the ninth straight month as the beleaguered industrial sector continued to suffer heavy damage from the yearlong economic slowdown.

Production at the nation’s factories, mines and utilities posted the worst showing since January, falling 0.7% last month on top of a 0.5% drop in May, the Federal Reserve reported Tuesday.

The latest snapshot of industrial activity was weaker than many analysts were expecting. They were predicting manufacturing activity would decline 0.5% in June.

“These numbers don’t provide any evidence that the bottom has indeed been hit in the factory sector,” said Lynn Reaser, chief economist at Banc of America Capital Management.

Operating capacity sank to its lowest point in nearly 18 years as companies reduced production amid sagging demand. The industrial sector operated at 77% of capacity in June, compared with 77.6% in May.

Many economists believe the industrial sector, hardest hit by the slumping economy, has been pulled into a recession of its own. To cope, manufacturers have sharply cut production and shed thousands of workers.

“It’s clear that the downturn in manufacturing that began last September has been nearly as severe as the 1990-91 recession,” said Jerry Jasinowski, president of the National Assn. of Manufacturers.

At factories, output fell 0.8% in June, after a 0.5% decline in May. The weakness was widespread, with production declining for, among other things, cars, trucks, home electronics, appliances, industrial machinery, semiconductors and metal products. Output of computers and office equipment was flat.

The Fed report also said mining production fell 0.4% in June, after a 0.1% decline the previous month. But output at gas and electric utilities rose 0.9% after a 1.7% drop in May.

For the April-June quarter, total industrial output fell at an annual rate of 5.6%, following a 6.8% annual rate of decline in the first quarter.

Recent economic data have offered mixed signals on the outlook for the industrial sector.

Earlier this month, the National Assn. of Purchasing Management reported that a key gauge of industrial activity in June turned in its best performance in seven months. Even with the improvement, the measure was at a level indicating that the manufacturing sector remained in recession.

The group’s purchasing index rose to 44.7% from 42.1% in May. An index above 50 signifies growth in manufacturing and a figure below 50 shows contraction. June’s 44.7% reading was the highest since 47.9% in November.

At the time, analysts were heartened that the index regained some lost ground and were hopeful that the worst of the manufacturing recession may have been over. But Tuesday’s report clouded the picture.

“The question now is when manufacturers will hit bottom and start to work their way out of this economic mess,” Jasinowski said.

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Industrial Production

Index; 1992=100; seasonally adjusted:

June: 142.5

Source: Federal Reserve Board

Capacity Rate

Percentage of factory capacity used, seasonally adjusted:

June: 77.0%

Source: Federal Reserve Board