Industrial Production Falls for Third Consecutive Month

The pace of industrial production continues to slow.

The Federal Reserve reports that overall industrial production fell 0.6 percent in December, a figure dominated by a 1.1 percent drop in manufacturing output, with the automotive industry especially hard hit. Though, at 147.3 percent of its 1992 average, industrial production was 3.1 percent higher than in December 1999, the rate of capacity utilization for total industry fell to 80.6 percent in December, 1½ points below its 1967-99 average.

The only significant components of the manufacturing industry to not experience a decline were computers, semiconductors and aerospace. In fact, if the fast growing computers, semiconductors and communication equipment industries are excluded, the manufacturing production index is down 2.1% from one year ago instead of being up 3.1%.

Industry Groups
Manufacturing output dropped 1.1 percent in December, with a 1.2 percent decrease in the production of durable goods and a 0.9 percent decrease in nondurable goods. Among durable goods, the losses were widespread, with the largest declines in primary metals, fabricated metal products, and transportation equipment. The output of nondurables has declined, on balance, over the last six months, and losses in December were widespread. The petroleum products and paper and products industries suffered the largest drops.

The factory operating rate declined to 79.1 percent in December, 2-1/2 percentage points below its September level and the lowest level since 1993. In recent months, capacity utilization has fallen significantly in the transportation equipment and primary metals industries. The operating rate at electric utilities surged to 97.8 percent in December, a level 8.2 percentage points above its 1967-99 average. The operating rate for mining was 86.9 percent, a reading at the high end of its range for the year.

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