Manufacturing Still Declining

Disruptions and lost business from the terrorist attacks helped to depress manufacturing activity in September for the 12th month in a row, the longest string of declines in industrial production since World War II.

The Federal Reserve reported Tuesday that output at the nation’s factories, utilities and mines plunged 1% last month, on top of a 0.7% decline in August.

The last time industrial production fell for 12 straight months was from November 1944 through October 1945, when the country was reverting to a peacetime economy at the end of World War II.

Operating capacity sank to 75.5% in September, the lowest level since June 1983, as companies throttled back production because of slumping demand.

“It is a mess,” said economist Clifford Waldman of Waldman Associates. “The industrial sector went from bad to worse after the attacks.”

Many economists believe that economic fallout from the Sept. 11 attacks on the World Trade Center and the Pentagon will deepen the recession that the manufacturing sector has been suffering through and push the broader economy into a full-blown downturn this year.

The attacks temporarily shut down the airlines, hobbled business and disrupted the flow of supplies to factories because of tightened security at the nation’s borders, particularly along the border with Canada.

The shock of the attacks also sapped consumer demand, sending retail sales down sharply in September as people stayed glued to their television sets and away from stores.

“Clearly, the immediate impact of the events of Sept. 11 was negative--from disrupted sales, air travel and production, not to mention the effect on the attitudes and expectations of consumers and businesses,” Federal Reserve Vice Chairman Roger Ferguson said Tuesday in New York.

The weakness in the industrial sector last month was broad-based.

At factories, output fell 1.1% in September, on top of a 0.9% decline in August.

Production of cars and parts declined 3.6% in September, after a 3% drop in August. The attacks had forced some auto plants to close temporarily because of supply problems.

Output of business supplies fell 1.5% in September, reflecting a sharp cutback in jet fuel production as the attacks resulted in fewer flights. Production of high-tech equipment, including computers, dropped 2.4%.

Gas and electric utilities saw output drop 1.8%, after rising 1.9% the month before. But mine production rose 0.3%, erasing a 0.3% drop in August.

For the third quarter, total industrial output declined at an annual rate of 6.2%, after a 4.4% rate of decline in the second quarter.

Production of consumer goods, such as home appliances, dropped at a rate of 3.2% in the third quarter, the largest decline since the first quarter of 1991, when the country was in the depths of its last recession.

Makers of business equipment saw output tumble at a rate of 13.4% during the third quarter, the biggest drop since the fourth quarter of 1982.