- The Washington Times - Saturday, November 17, 2001

ASSOCIATED PRESS

Aftershocks from the September 11 terrorist attacks helped to depress industrial activity in October for the 13th straight month, the longest stretch of declines since 1932. All the economic weakness, however, had a silver lining: Consumer prices fell.

The latest batch of economic reports released yesterday painted a picture of a sinking economy that many analysts believe has slid into a recession. Against this backdrop, companies have cut prices to bolster sales and energy prices have fallen in response to weak worldwide demand, thus keeping a lid on inflation.

The Consumer Price Index, a key gauge of inflation, declined by 0.3 percent in October, following a 0.4 percent rise in September, the Labor Department said. The drop in prices is good news for consumers and highlighted one of the few benefits a weakening economy can provide.

"There will be many more bargains in the months ahead, especially with the holidays approaching," predicted Bill Cheney, chief economist for John Hancock Financial Services.

While heavy discounting and zero-percent financing for cars sent retail sales up by a record 7.1 percent in October, that didn't translate into ramped-up production during the month. But it probably helped businesses whittle excess inventories of unsold goods, economists said.

Industrial production plummeted in October for the 13th straight month, falling by 1.1 percent, on top of a big 1 percent decline in September, the Federal Reserve said.

The 13-month stretch of declining activity marked the longest period of falling industrial output since a 15-month stretch that ended in July 1932.

Although manufacturing is clearly ailing, it's not nearly as sick as it was during the Great Depression, economists said. While industrial output fell by a cumulative 6.5 percent over the 13 months, it sank by 53 percent from July 1929 through July 1932.

Still, the nation's manufacturing sector has been hardest hit by the more than yearlong economic slump, and the terrorist attacks dealt the industry another severe blow. To cope with the fallout, companies have cut back production, trimmed hours, let go of workers and heavily discounted merchandise.

"The manufacturing recession has entered its 13th month," said David Huether, chief economist at the National Association of Manufacturers.

On Wall Street, investors opted to lock in recent profits, pushing stocks lower. The Dow Jones Industrial Average lost 5.40 points to close at 9,867.

The broader market also registered negligible losses.

The Nasdaq Composite Index slipped 1.99, or 0.1 percent, to 1,899, and the Standard & Poor's 500 index declined 3.59, or 0.3 percent, to 1,139.

However, advancing issues were ahead of decliners by an 8-to-7 margin on the New York Stock Exchange.

The 1.1 percent drop in industrial activity was the biggest since a 1.3 percent decline in November 1990. The weakness was broad-based, with production declining for autos, appliances, high-tech equipment, including computers and semiconductors, clothing, metal products and business equipment.

"If misery loves company, there is both a lot of misery and a lot of firms sharing it," said Joel Naroff of Naroff Economic Advisors.

Operating capacity sank to 74.8 percent in October, the lowest level since June 1983, as companies throttled back production.

The economy shrank at a 0.4 percent rate in the third quarter and many analysts are predicting a bigger decline in the current quarter, thus meeting a common definition of recession: two consecutive quarters of declining economic output

With inflation under wraps, the Federal Reserve will have leeway to cut interest rates again to jump-start economic growth, analysts said. The Fed cut rates 10 times this year and some economists are predicting an 11th rate cut at the Fed's final meeting of the year Dec. 11.

The drop in consumer prices in October was helped by a record 6.8 percent decline in natural gas prices.

Gasoline prices declined by 10.7 percent last month, the largest decrease since July.

Fuel oil prices fell by 5.2 percent in October, the largest drop since April 2000.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide