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Industrial Production Falls

The manufacturing sector grew in October, but industrial production fell 0.1 percent, the third decline in four months, the Federal Reserve said Monday.

Output of the nation's factories, mines and utilities was held down by a 3.4 percent plunge in utility output. Manufacturing output increased 0.3 percent on strong growth in autos and other durable goods. Factory output is down 0.2 percent from the highs reached just before the two-month strike at General Motors (GM) plants in June and July.

Capacity utilization fell 0.4 percentage points to 80.6 percent, 1.5 percent below its 30-year average and the lowest since September 1992. Factory utilization dropped to 79.4 percent, the lowest since March 1992. The Fed watches the capacity numbers closely for signs of imminent bottlenecks that could boost inflation, but that's not a problem.

Wall Street was expecting industrial production to rise 0.1 percent and for capacity utilization to rise to 81.1 percent.

The report shows a weak factory sector that is facing tough competition and weaker demand. The Federal Reserve will meet Tuesday to discuss a possible interest rate cut to stimulate the economy and boost demand. The weak manufacturing sector is a major worry of policymakers.

In manufacturing, auto production rose 2 percent in October after falling 3.3 percent in September. Excluding motor vehicles, manufacturing output rose 0.2 percent in October. Durable goods industries increased production by 0.6 percent, while nondurable manufacturing fell 0.1 percent.

The Fed said output of primary metals dropped 0.6 percent in October as steel and iron production sink. Steelmakers have complained that foreign producers are dumping raw and processed steel in the United States; U.S. production has tumbled more than 8 percent in the past two months.

Semiconductors, another sector that has been hurt by foreign competition, rebounded 2.9 percent in October, the largest gain since January.

The weakness in nondurables was widespread among the apparel, chemical, paper and petroleum industries, the Fed said.

Written By Rex Nutting

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