More Weak Economic News: Industry Geared Down in October
WASHINGTON (AP) _ American industry stumbled further in October as factories, mines and utilities operated at less than 80 percent of capacity, down to its lowest level in four months, the government reported Friday.
On Wall Street, the stock market plunged by its fifth-biggest drop ever in a major afternoon sell-off prompted by the growing pessimism about the economy. The Dow Jones Industrial Average of 30 leading stocks fell more than 120 points.
Analysts said the Dow’s decline reflected a series of negative economic reports this week, as well as congressional calls for a cap on the amount that banks can charge consumers on credit-card interest rates.
As the Federal Reserve reported Friday that operating rates for America’s big industry had fallen to the lowest level since June, other government data showed that production remained stagnant and inventories began piling up.
The weak news suggests more factory layoffs could be coming in the midst of a faltering economic recovery, analysts said. Through mid-summer, the nation’s industrial sector had been seen as leading the economy out of the recession.
Now, ″It’s hard to find any real pocket of strength″ in the sector, said economist Gilbert Benz of the Swiss Bank Corp. in New York.
The numbers offer ″further evidence that the recovery is in tatters,″ agreed John M. Albertine, who heads an economic forecasting firm in Washington.
President Bush acknowledged that ″we’ve got some short-term problems here. And they’re significant ...″
But, he added in a teleconference call to Fortune 500 executives meeting in Charleston, S.C., ″We’ll be coming out of this.″
Bush insisted the fundamentals are in place ″for the best growth we’ve seen in years″ starting in 1992.
In its report on capacity utilization, the Federal Reserve said the operating rate of the nation’s factories, mines and utilities slipped two- tenths of a percentage point, down to 79.6 percent. It was the lowest level since last June’s similar 79.6 percent.
The Labor department had suggested the decline earlier when it reported the loss of 32,000 factory jobs in October on top of a 31,000 loss a month earlier. Earlier reports also showed that factory orders, a barometer of future activity, fell sharply in both August and September.
Friday’s report from the Fed showed that industrial production remained flat in October after inching up 0.2 percent in September and falling 0.1 percent in August, the first decline since last March.
In another report, the Commerce Department said businesses increased their inventories by 0.6 percent in September, the first advance in eight months and the largest in more than a year.
Analysts had said that at some point, businesses would have to rebuild their stockpiles to meet renewed demand. That in turn could produce new jobs and encourage more sales.
But business sales lagged in September, rising just 0.4 percent. And the department reported on Thursday that sales on the retail level, which had risen 0.6 percent in September, fell back 0.7 percent in October.
Unless rising inventories are matched by increased sales, businesses often are forced to cut back on production, which can lead to more factory layoffs.
The Fed report showed that all sectors - factories, utilities and mines - posted declines in their operating rates.
The rate at factories was 78.6 percent, down two-tenths of a percentage point from August. The rate at plants making durable goods fell to 76.0 percent from 76.4 percent.
An exception was automobile production lines, where it rose 1.0 percentage point to 73.5 percent. Still, auto sales declined in October, suggesting the increase may not be sustained.
And at plants making non-durable goods, the rate slipped to 82.0 percent from 82.1 percent. It was off 0.2 percentage point to 87.7 percent at mines, and down 0.1 percentage point to 84.1 percent at utilities.
In the industrial production section of the report, the Fed said output at manufacturing plants making both durable and non-durable goods remained unchanged in October after posting a 0.5 percent gain a month earlier.
Output of durable goods - usually expensive items expected to last more than three years - fell 0.2 percent after a 0.6 percent advance in September. The report cited a decline in the output of both automobiles and consumer appliances.
Production of non-durable goods, such as chemicals and clothing, increased 0.2 percent after rising 0.3 percent in the preceding month.
Mining output fell for the third straight month, down 0.2 percent after drops of 1.5 percent in September and 0.7 percent in August. Utility production edged up 0.1 percent after plunging 1.5 percent in September.
The Fed said its industrial production index in October stood at 108.2 percent of its 1987 base of 100. That was 1.6 percent below October 1990.