U.S. Industrial Production Fell 0.6% in November, Led by Autos

By Courtney Schlisserman

Dec. 15 (Bloomberg) -- U.S. industrial production fell in November for the third time in four months, led by a slump at automakers as sales plummeted.

Output at factories, mines and utilities dropped 0.6 percent, less than forecast, after an increase of 1.5 percent in October that was more than previously reported, the Federal Reserve said today in Washington.

The weakest sales in 26 years have brought General Motors Corp. and Chrysler LLC to the brink of bankruptcy, prompting cutbacks in output that have deepened the year-long recession. The Bush administration said last week it was willing to tap the $700 billion bank bailout fund to keep the automakers alive until January after the Senate failed to approve emergency cash.

“Manufacturing is getting hit from every direction,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “Exports are starting to decline on top of domestic demand having blown up the last couple of months.”

Economists had forecast industrial production would fall 0.8 percent, according to the median projection in a Bloomberg News survey. Estimates ranged from a decline of 2 percent to a gain of 0.4 percent.

Capacity utilization, or the proportion of plants in use, fell to 75.4 percent from 76 percent in October. Economists had forecast that figure would fall to 75.6 percent, according to the Bloomberg survey.

New York Manufacturing

This report follows one today from the Federal Reserve Bank of New York showing manufacturing in that region contracted in December at the fastest pace since records began in 2001. The New York Fed’s general economic index fell to minus 25.8, the lowest level since records began in 2001, from minus 25.4 in November as measures of new orders and shipments remained weak.

Factory output, which accounts for about four-fifths of industrial production, decreased 1.4 percent, led by declines in output of metals, furniture and construction supplies as well as autos. Aircraft production was one of the only manufacturing categories showing gains during the month, as work resumed at Boeing Co. following a strike.

Utility production increased 1.6 percent after rising 0.7 percent a month earlier. Mining output, which includes oil drilling, rose 2.5 percent.

Motor vehicle and parts production declined 2.8 percent in November following a 3.6 percent decrease the prior month, the report said. Automakers assembled cars and light trucks at an annual rate of 7.31 million vehicles during the month.

Production of consumer durable goods, including automobiles, furniture and electronics, fell 3 percent.

Auto Industry Cutbacks

The auto industry is at the center of the manufacturing recession. GM spokesman Tony Sapienza said in an interview last week that the automaker is cutting 250,000 units of production from its plan for 2009’s first quarter, a 30 percent reduction.

Honda Motor Co. is cutting 119,000 vehicles from its North American production plan, tripling its reduction for the fiscal year that ends in March, the Tokyo-based company said last week.

The Bush administration last week dropped its opposition to using the bank-bailout money to save the automakers. GM needs $4 billion from the government by the end of the month to pay its bills. Autos sold at a 10.2 million annual pace last month, the fewest since 1982.

Other reports reinforce a bleak outlook for manufacturing. The Institute for Supply Management’s factory index for November dropped to the lowest level in 26 years, the Tempe, Arizona- based group said Dec. 1.

Declining Exports

Slowing international demand is adding to factories’ woes. U.S. exports dropped for a third straight month in October, reaching the lowest level in seven months, the Commerce Department said last week.

“While we were able to rely on this as an offset earlier, that has gone away,” Jonathan Basile, an economist at Credit Suisse Holdings in New York, said before the report.

Cummins Inc., the maker of more than a third of North America’s heavy-duty truck engines, said this month it will eliminate at least 500 jobs by the end of the year because of “continued deterioration” in the U.S. economy and other key markets. Cummins said in October that sales growth will be about 12 percent this year, lower than it previously forecast, as the U.S. and European economies weakened.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net