- The Washington Times - Monday, March 16, 2009

WASHINGTON (AP) - The nation’s industrial output fell for the fourth straight month in February, with factories operating at their lowest level in six decades of record keeping. Analysts forecast more production cuts to come as companies are battered by recessions at home and abroad.

The Federal Reserve reported Monday that industrial output dropped by 1.4 percent last month, slightly larger than the 1.2 percent decline economists had expected.

The weakness included a 0.7 percent fall in manufacturing output, which pushed the operating rate at the nation’s factories down to 67.4 percent of capacity last month, the lowest level on records that go back to 1948.

The drop in manufacturing output occurred even though production at the nation’s auto plants actually rose sharply after four straight months of declines.

Despite the news, Wall Street stocks pushed higher for a fifth straight day. They were bolstered by reassuring comments from Federal Reserve Chairman Ben Bernanke in a television interview that the recession would probably be over by year’s end if the government’s program to boost the banking system succeeds.

But private economists viewed the further plunge in industrial production as another sign of how weak the economy is at present. The recession that began in December 2007 is already the longest in a quarter-century, with the economy plunging at an annual rate of 6.2 percent in the fourth quarter. Many economists believe the downturn in the current quarter could be just as severe.

They said manufacturers are being hammered by the deep U.S. recession and a spreading downturn overseas that has cut sharply into demand for U.S. exports in major overseas markets.

“The manufacturing sector is still declining as firms struggle to pare inventories and come to grips with lower consumer spending, the housing collapse, evaporating exports and the full force of a capital spending downturn,” said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. “These negative forces are a lot to absorb and it is too early to see a turnaround.”

Nariman Behravesh, chief economist at IHS Global Insight, said that one glimmer of hope could be seen in a slowdown in the rate of decline in manufacturing outside of autos. He said if this persists over the next few months, it could be an indication that manufacturing has at least hit a bottom and is not falling further.

For February, output in the mining industry, a sector that includes oil and gas drilling, was off by 0.4 percent and utility plant production plunged by 7.7 percent, reflecting warmer-than-normal weather last month which cut into demand.

Production at auto plants and auto parts manufacturers rose 10.2 percent in February after four straight months of declines including a sharp 24.7 percent drop in January. But even with the rebound, the auto industry remains under tremendous pressures because consumers, faced with widespread layoffs, are not in a mood to make big-ticket purchases of autos or many other goods.

The overall operating rate for manufacturing, mining and utilities fell to 70.9 percent of capacity in February, matching a record low set in December 1982, a month when the country was just beginning to pull out of the severe 1981-82 recession.

U.S. factories are being battered not only by falling demand in the United States but also in key overseas markets as the recession that began in the U.S. spreads overseas.

The government reported Friday that U.S. exports fell for a sixth straight month in January. Many of the nation’s biggest companies, which do a large share of their business overseas, are struggling with the effects of the global drop in demand. More than 75 percent of the orders for commercial planes that Boeing Co. held last year came from outside North America, as did about 60 percent of Caterpillar Inc.’s sales of heavy machinery and engines.

Both companies are forecasting lower results this year and are slashing jobs. Boeing has said it plans to cut 10,000 jobs in its commercial and military divisions while Caterpillar said it will trim 22,000 positions.

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