U.S. sees significant drop in big industry production

Big industry production at factories, mines and utilities in the U.S. fell 2.8 percent in September, which is the biggest drop since December 1974, according to the Orlando Sentinel. This drop was in addition to a 1 percent drop in August and was much higher than anticipated; economists had been forecasting a 0.8 percent decline for September.

The Federal Reserve estimated that disruptions related to Hurricanes Gustav and Ike were responsible for about 2.25 percentage points of the total decrease in September. The hurricanes affected crude oil and natural gas production in the Gulf of Mexico; caused power outages; and shut down petroleum refineries.

However, the hurricanes are not the only reason for the decline. About half a percentage point was attributed to a strike in the commercial aircraft industry. And the manufacturing industry already had been affected by the housing collapse, credit problems and weaker demand, especially for housing-related goods and construction materials.

Slowdowns in foreign economies are expected to further weaken demand for U.S. exports.

Date : 10/22/2008