Industrial Output Down in September

WASHINGTON (AP) — U.S. industrial output turned in another weak reading in September as the short strike at General Motors contributed to a big drop in auto production.

The Federal Reserve said that industrial output edged up 0.1 percent in September following no change at all in August. The August reading had been reported a month ago as a stronger 0.2 percent gain.

The concern is that the deep slump in housing and a severe credit crunch will trigger further cutbacks in industrial production as businesses grow cautious about the future.

Delivering his latest assessment on the economic prospects, Federal Reserve Chairman Ben Bernanke said Monday night the deepening slump in housing will be a "significant drag" on the economy into next year and it will take time for financial markets to fully recover from the credit crisis that erupted in August.

Many analysts believe the Fed, which cut a key interest rate for the first time in four years at its September meeting, will follow up with further rate cuts to make sure the economic troubles don't push the country into a recession.

The Fed report showed that output of autos and auto parts fell by 3.3 percent in September following a 1.6 percent drop in August. Part of the September weakness was blamed on the brief two-day strike at General Motors.

All of manufacturing posted a small 0.1 percent increase in September after a sharp 0.4 percent drop in August. That weakness followed solid gains of 0.6 percent in June and 0.8 percent in July.

The nation's utilities saw output decline by 0.1 percent in September after a 4.6 percent surge in August that had reflected a heat wave that hit much of the country.

Output in mining, a category that includes oil well production, edged up 0.2 percent in September, a rebound following a 0.6 percent drop in August.

Analysts believe that U.S. factories will be under pressure in the months ahead, reflecting waning demand for domestic-made cars and weakness in such housing related industries as building materials.

Global Insight, a private forecasting firm, said it expected manufacturing output in the July-September quarter will post a strong gain of 4.2 percent, thanks to the good momentum at the beginning of the quarter, but it forecast that manufacturing growth would slow to just 1.2 percent in the current quarter and fall below 1 percent in the first three months of next year.

With the tiny increase in output in September, the nation's factories, mines and utilities operated at 82.1 percent of capacity, unchanged from August.