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Economy in Brief

U.S. Factory Output Fell Again in December; 2008 Decline The Largest Since 1975
by Tom Moeller January 16, 2009

Industrial production during December fell for the ninth month of 2008. The 2.0% drop followed a 1.3% November decline which was revised deeper from the initial report. Last month's decline was double Consensus expectations for a 1.0% decline. For the year, industrial production declined 7.8% which was the sharpest negative twelve-month change since the deep recession of 1975.

Factory output took the brunt of the recession's force and declined 9.9% last year. That was led by a 13.9% twelve-month decline in output of construction supplies, again the deepest since 1975. Output of consumer goods fell 5.2% during last year, pulled lower by a 26.7% December-to-December drop in the output of motor vehicles & parts. That came on top of roughly 3% declines during the prior two years. Outside of the auto sector output also was hard it and production of furniture fell 21.9% while apparel output dropped 6.0%. Production of business equipment was late to the recession's downturn, but for the year production fell 6.7%.

Industrial production in the high-tech sector fell 6.5% last year. That was the worst performance since 2001. Outside of high-tech production declines amounted to 11.0% for the year, the worst decline since 1975.

Less the weakness in autos and high tech, output fell 6.9% last year, the steepest since 1982. Machinery production led that fall with a steep 11.6% drop while output of electrical equipment production also fell, but by 9.5% y/y. Production of chemicals fell 11.6% y/y, also the worst since 1975, but apparel output fell a modest 6.0%.

Capacity utilization fell to 73.6%, the lowest level since 2003. Utilization in the factory sector dropped further, however, to 70.2%, its lowest since 1982. Capacity in the factory sector increased a firm 1.7% y/y).

INDUSTRIAL PRODUCTION (SA, %) December November Y/Y 2008 2007 2006
Total Output -2.0 -1.3 -7.8 -1.8 1.7 2.2
   Manufacturing -2.4 -2.2 -9.9 -2.5 1.7 2.4
     Consumer Goods -1.7 -1.0 -5.2 -2.1 1.7 0.3
     Business Equipment 1.8 2.9 -6.7 -1.1 3.3 10.4
     Construction Supplies -3.3 -4.6 -13.9 -6.1 -2.5 2.2
  Utilities -0.1 0.9 0.5 0.4 3.3 -0.6
Capacity Utilization 73.6 75.2 81.0 (Dec.'07) 78.2 81.0 80.9
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