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Economy in Brief

US IP Plunges in September and Plummets in the Quarter
by Robert Brusca October 16, 2008

US industrial output, an index of real output, is off by 2.8% in September but the drop is exaggerated by the impact of two hurricanes and a job action at aircraft manufacturer Boeing. The Federal Reserve Board reported that the disruptions from the hurricanes contributed about 2.25 percentage points to the decline while the Boeing strike contributed 0.5 percentage point.

The drop is beginning to look like the drops IP made in the last recession. Declines in output are widespread in September.

For the quarter which is now complete based on preliminary data the drop in output is at a rate of -6%, a substantial pace of decline for a quarter (saar). Consumer goods output is down at a -6% pace with consumer goods ex-auto output down at a pace of -8.2% and consumer energy off at a -12.6% pace. In this framework auto output rose in September but fell in the quarter at a pace of -5%. The consumer vehicle sector is not what is leading us lower.

The business sector is leading us lower. The business sector saw a sharper decline with business equipment output off by -8.4% saar led by a whopping decline of -41% (saar) for transportation. Materials output was off at a pace of -6%.

The weakness in the industrial sector clearly is widespread. The slowing in US exports will hit the sector hard. Manufacturing has been shedding jobs but at a slower pace than it has in most recessions. It looks like the pace of job losses in MFG is about to pick up. That in turn that will send waves of repercussions throughout the economy as a vicious circle of job cuts is likely to ensue since workers that lose jobs also are consumers that lose income. As that happens spending drops and that leads to more job cuts. It is vicious circle time: Not Miller time.

Industrial Production
  Monthly Pct. Changes At Annual Rates of Change SAAR
  Month-to-month Pct. Change 3-Month 6-Month Year/Year 08-Q3
Industrial Output Sep-08 Aug-08 Jul-08 %Change %Change %Change Pct Change
All Prod&Materials -2.8% -0.9% -0.1% -15.1% -8.4% -4.5% -6.0%
All Products -2.3% -1.1% -0.2% -14.1% -7.9% -4.9% -5.9%
Final Products -2.5% -1.2% -0.2% -15.6% -8.5% -4.9% -5.8%
Manufacturing only
MFG - NAICS -2.7% -1.0% 0.0% -14.4% -8.6% -4.8% -5.8%
MFG-Durables -2.4% -1.5% 0.3% -14.2% -9.2% -4.6% -4.8%
MFG-Nondurables -2.9% -0.4% -0.4% -14.4% -7.9% -4.9% -7.0%
Consumer Goods -1.3% -1.7% -0.3% -13.1% -6.9% -5.0% -6.0%
Durables -0.7% -6.2% 1.1% -23.1% -13.1% -11.7% -6.7%
Automotive Prod. 1.7% -10.9% 1.9% -30.6% -17.3% -15.2% -5.0%
Ex. Automotive Prod. -2.7% -1.7% 0.4% -15.9% -9.0% -8.1% -8.2%
Nondurables -1.6% -0.6% -0.5% -10.6% -5.5% -3.1% -5.7%
NonEnergy -0.4% 0.0% -0.5% -3.7% -2.4% -1.7% -2.5%
Cons Energy -4.4% -1.6% -0.5% -25.8% -12.2% -5.9% -12.6%
Business Equip. -7.0% -0.2% 0.0% -28.7% -16.5% -7.0% -8.4%
Transportation -33.6% -4.5% 0.2% -145.6% -72.9% -38.2% -41.0%
Computer & Office Eqpt 0.9% 0.6% 0.1% 6.4% 6.7% 15.6% 4.2%
Ex. Tech.& T-port -9.2% 0.4% -0.3% -36.6% -21.7% -10.4% -11.5%
Materials -3.4% -0.8% 0.2% -16.0% -9.0% -3.8% -6.0%
Durables -1.0% -1.0% 0.2% -7.6% -5.2% -1.8% -3.3%
Nondurables excl Energy -3.3% -0.3% -0.6% -16.6% -9.4% -6.6% -7.8%
Energy -6.2% -0.9% 0.8% -25.0% -13.2% -4.1% -7.8%
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