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Industrial output declines more than expected

The August weakness is led by an 11.9% drop in production of motor vehicles and parts.

September 16, 2008|From the Associated Press

WASHINGTON — Government data show the nation's industrial output plunged in August by nearly four times the amount that had been expected. It's the worst performance since Hurricane Katrina devastated the Gulf Coast in 2005.

The Federal Reserve reported Monday that industrial output dropped 1.1% last month, far worse than the 0.3% decline that economists had been expecting.

The weakness was led by an 11.9% drop in production of motor vehicles and parts, reflecting the hard times facing the U.S. auto industry.

The problems in autos contributed to a 1% overall drop in manufacturing, the first decline since a 0.9% fall in April.

Production at the nation's utilities was off 3.2% during the month after a 1.6% decline in July. Mild weather in much of the country last month contributed to lower demands for air conditioning.

Output in mining, the category that includes oil and gas drilling, fell 0.4% in August. The Fed said some of that weakness reflected precautionary shutdowns of oil platforms in the Gulf of Mexico ahead of Hurricane Gustav.

The U.S. manufacturing sector has been battered by a prolonged housing slump and feeble demand for autos because of the weak economy and the big jump in gasoline prices that occurred this year.

The problems hurting domestic demand have been partially offset by a boom in export sales, helped by a weaker dollar.

But economists worry that that source of strength will come under pressure in coming months as some of the nation's biggest overseas markets in Europe and Asia face the threat of recessions.

The 1.1% decline in total output in August followed gains of 0.1% in July and 0.2% in June, and was the largest drop since a 1.8% fall in September 2005.

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